Leonard Riggio, founder and chairman, Barnes and Noble, Inc., leaves the Barnes and Nobles shareholders meeting in New York on Tuesday, Sept. 28, 2010. Photographer: Jin Lee/Bloomberg ***Local Caption*** Leonard Riggio
Leonard Riggio, Barnes & Noble chairman and largest shareholder, was among multiple parties to express an interest in acquiring the company © Bloomberg

Barnes & Noble’s founder has launched a bid to take the country’s last remaining large bookstore chain private 25 years after it launched on the US stock market.

Leonard Riggio, the New York-listed company’s chairman and largest shareholder, was among multiple parties to express an interest in acquiring the company, Barnes & Noble said on Wednesday.

Both private equity funds and listed companies were among those interested in a possible purchase, a person briefed on the sale process said.

The disclosure pushed shares in Barnes & Noble, which is battling to improve sales in the face of pressure from Amazon and other rivals, up 22 per cent in after-hours trading to $6.70.

Barnes & Noble once towered over the industry and became known for its big-box bookstores in a rapid expansion during the 80s and 90s, as independent sellers declined. The retail upheaval even provided the back-story for the 1998 Tom Hanks and Meg Ryan romantic comedy You’ve Got Mail.

But its own subsequent struggles to deal with the disruption of ecommerce has left the company vulnerable to a low ball takeover. Even after the rally on Wednesday the shares are still down 78 per cent from a 2006 peak, when the company was valued at $3.2bn. Barnes & Noble’s market value was less than $400m before the shares popped on Wednesday, while the company carried long-term debt of $178m at the end of July.

The company said its board had appointed a special committee to evaluate the offers. It includes Mark Carleton, Paul Guenther, Patricia Higgins and Kimberley Van Der Zon. The committee will also be advised by separate legal and financial counsel, which it has not yet named. The company itself is being advised by Guggenheim Securities and law firm Paul Weiss.

The board said that Mr Riggio had committed to backing the suitor that the special committee ultimately recommends, despite his own interest in taking the business private. It added that it could give no assurance that a deal would be consummated.

The decision to begin a formal review process was prompted by stake building by a single mystery buyer in Barnes & Noble in the open market, which the bookseller said was occurring in “rapid material accumulations”. Barnes & Noble said it was unable to the identify the acquirer of its shares and would adopt a shareholder rights plan — a move that could thwart would be hostile buyers.

The plan allows the company to offer preferred shares at a 50 per cent discount to shareholders should any one investor or group, without board approval, take ownership of 20 per cent or more of its outstanding stock. The investor that triggers the execution of the rights issue plan is unable to buy shares at the reduced price.

The identity of suitors other than Mr Riggio was not disclosed on Wednesday. According to a lawsuit filed in August by the company’s former chief executive Demos Parneros, a rival book retailer had made a takeover offer earlier this year. In June, after conducting due diligence, the offer was withdrawn.

In his suit Mr Parneros claimed Mr Riggio fabricated reasons to fire him. Mr Parneros claimed he had been falsely accused of misconduct.

In response to the legal action against it, the company said that “a thorough investigation” had “revealed multiple examples of significant misconduct” by Mr Parneros.

Mr Riggio founded the modern day company in 1971 when he bought a single store that carried the name.

Barnes & Noble went public in 1993 at $20 per share and its chairman still holds a 19 per cent stake, according to the most recent Securities and Exchange Commission proxy filings. In 2015, in an effort to boost the company’s share price, Barnes & Noble spun off its education and college book business.

.

Get alerts on Mergers & Acquisitions when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article