Ahead of the Bell: Barnes & Noble on the block

NEW YORK

Shares of Barnes & Noble Inc. jumped in premarket trading on Wednesday, after the nation's largest traditional bookseller said it is exploring strategic alternatives, including putting itself up for sale.

Shares rose $3.26, or 25 percent, in premarket trading to $16.10.

But Credit Suisse analyst Gary Balter said finding a buyer may be difficult.

The announcement came as Barnes & Noble faces a lawsuit from an activist shareholder, Ron Burkle, about the company's "poison pill" plan. Burkle, who owns 18 percent of the stock, argues the "poison pill" plan creates an unfair playing field that favors chairman Leonard Riggio, who has a 30 percent stake in the company, and other Riggio family members.

Burkle has said he is not interested in a takeover but wants to see changes in the company's corporate governance.

"It's difficult to envision a buyer of this company given the structural issues it continues to face," said Credit Suisse analyst Gary Balter. "We view the announcement as possibly an attempt to quell some of the corporate governance concerns raised by Ron Burkle and perhaps a way to explore if any outside interest actually exists."

Still, he said the announcement should not be viewed as surprising, since shares have fallen by more than half since April, and other companies facing "significant structural changes" have made similar announcements in the past.

But Barnes & Noble's core book selling business, pressured by online competitors and discounters, remains a problem, Balter said.

Barnes & Noble has shifted its focus to the small, but quickly growing, electronic book business, debuting its own e-book reader last year and expanding its e-book online bookstore.

But "as long is its primarily a brick & mortar retailer and that business remains pressured, we believe it will be difficult to get any credit," Balter said.

He kept an "Underperform" investment rating, and $10 price target on the stock.