Wave goodbye to your sprawling, visually unpleasing local Barnes & Noble (BKS) bookstore. And say hello to something way more personal, friendlier on the eyes and easier to shop at.
That is provided veteran book-selling CEO James Daunt and his deep-pocketed friends at activist firm Elliott Management get their prize. Elliott Management announced Friday it plans to acquire Barnes & Noble for $683 million. The deal values Barnes & Noble — which has struggled for years with weak store traffic, executive turnover and competition from Amazon’s Kindle — at a hefty 43% premium.
Barnes & Noble will be combined with Elliott’s other book investment Waterstones in the U.K. Daunt, who founded the Daunt bookstore chain and was then installed as managing director of the near death Waterstones in 2011, is prepared to assume the CEO role of the combined entity upon completion of the deal.
Daunt, a tough-talking Brit who started his professional career as a JPMorgan banker, is chomping at the bit to get to work on saving Barnes & Noble.
“Bookstores clearly need to change and the model of a chain bookseller in particular with its rows of books simply doesn’t work anymore,” Daunt tells Yahoo Finance. “It worked from a practical sense, but I am not sure it worked from a financial sense.”
How to save an ailing book chain
Daunt — who describes himself as not “snobbish” about books, though appreciates them greatly — tells Yahoo Finance that he will try to replicate his Waterstones turnaround playbook at Barnes & Noble. That playbook saved the U.K. bookseller, with more than 200 locations, and it centers on getting the nuts and bolts of selling books correctly in the digital download age.
In the case of Barnes & Noble, Daunt hints it may revolve around removing unprofitable books from stores so they are easier to shop (and to cut costs), ensuring the store reflects the market it’s in and sprucing up the stores (Barnes & Noble stores are generally seen as outdated visually). Daunt also wants to open stores, but ones that are way smaller than a typical 25,000-square-foot Barnes & Noble location.
“I always think a bookstore with a personality and that reflects the local environment is always going to do better than anything defined by someone sitting in an office somewhere,” says Daunt, adding that Barnes & Noble’s stores “need a bit of love” and that he plans to “plunge deeply” into the pockets of Elliott Management to help improve their look and feel.
There’s a high sense of urgency to reverse Barnes & Noble’s years of weak sales and pressured profits, according to Daunt. Being an activist firm, Elliott Management will likely want to sell the entire book operation at some point for significantly more than it paid. It can only do that if the overall business is growing again.
“We must get it right at the beginning,” Daunt says.
Daunt and Elliott Management are not without one near-term challenge, however.
Book re-seller Readerlink LLC is reportedly working on putting forth a higher bid for Barnes & Noble.
Good luck with that one. Given Elliott’s deep pockets and the well-regarded book-selling executive Daunt waiting to takeover, it may be hard to persuade Barnes & Noble shareholders to accept an offer from Readerlink.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi.
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