Elliott Advisors Buys Barnes & Noble

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Eric Thayer_Bloomberg

Under the deal, Waterstone's chief executive officer James Daunt will become CEO of Barnes & Noble. Elliott will keep the chains operating independently but the brands will "share a common CEO and benefit from the sharing of best practice between the companies".

Shares in the largest USA bookstore chain rose 11%, after ending up 30% on Thursday when reports of a potential deal surfaced.

Per the transaction terms, Elliott will acquire Barnes & Noble for $6.50 per share, representing approximately a 43% premium to the company's 10-day volume-weighted adjusted share price as of June 5. Shares dropped almost 28% for the year to date, and it only got worse. According to the announcement, "Elliott seeks to build upon this strong foundation as it addresses the significant challenges facing the bricks and mortar book retail space, applying a model that successfully turned around Waterstones over the past decade".

Including the assumption of debt, the deal is worth about $683 million.

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That's when shares jumped almost 30% following a report that Elliott Management was about to make an offer for B&N.

Barnes & Noble would not mark Elliott's first bookstore deal.

CNBC columnist Lauren Hirsch said Barnes & Noble has faced "continued pressure" from Amazon.com Inc. We meet these with investment and with all the more confidence for being able to draw on the unrivalled bookselling skills of these two great companies.

"We are pleased to have reached this agreement with Elliott, the owner of Waterstones, a bookseller I have admired over the years", Barnes & Noble founder Leonard Riggio said in a statement. In October, the company said it was considering a sale to several interested parties, including Riggio. Elliott's United Kingdom subsidiary, Elliott Advisors (UK), is making the acquisition. And a spin-off of the company's campus book stores into the separately traded Barnes & Noble Education in 2015 failed to get the more focused and smaller Barnes & Noble back on track either. Employees are encouraged to write their own reviews, which are displayed next to the titles. Zumiez also reversed a year-ago loss with a modest profit for the period, and CEO Rick Brooks said that its efforts to cut back on promotional discounting paid off with stronger margin.

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