Barnes & Noble (BKS:US) Inc., the struggling bookseller, received a proposal from G Asset Management LLC to acquire 51 percent of the company at $22 a share (BKS:US), valuing the total business at $1.32 billion.
G Asset also proposed buying 51 percent of Barnes & Noble’s Nook e-book division at $5 a share as an alternative deal, according to a statement yesterday from the investment firm. It said it was confident that separating the business would unlock “substantial” shareholder value.
The move represents an increased bid over G Asset’s $20-a-share offer in November of last year, also for 51 percent of the business. The investment firm has been pushing Barnes & Noble to spin off its Nook division since at least 2011. Yesterday’s announcement sent the company’s shares up as much as 14 percent in intraday trading, though it’s unclear how serious the offer is, David Strasser, an analyst at Janney Montgomery Scott LLC in New York, said in a note to clients.
“We do not know how secure the financing is for this deal or how real the offer is at this time,” Strasser, who has a neutral rating on the stock, said in the note. Barnes & Noble “has tried to sell the business in the past and could not agree on price for these assets, and we are unsure if this would be agreeable.”
Mary Ellen Keating, a spokeswoman for New York-based Barnes & Noble, said her company had received the offer. She declined to comment further.
In a phone interview, G Asset founder Michael Glickstein said he couldn’t comment on financing for a potential deal.
“We’ve always seen tremendous breakup value” in the company, he said. Glickstein also said he has extreme confidence in Barnes & Noble Chief Executive Officer Michael Huseby.
After the midday surge triggered by G Asset’s statement, the stock pared its gains. It closed at $17.69 in New York, up 5.4 percent. The shares (BKS:US) have climbed 18 percent this year.
Glickstein reported in February 2012 that he held a 5 percent stake in Barnes & Noble, acquired for a total of $1.6 million. The holding was comprised of 41,575 shares and call options to purchase another 2.98 million shares, according to a Schedule 13D filed with the U.S. Securities and Exchange Commission at the time.
The SEC filing didn’t provide the terms of the options, such as the price at which they could be exercised to purchase Barnes & Noble shares, or the date of expiration for the contracts.
Glickstein describes himself in the SEC filing as the managing member of G Asset, a New York-based firm that serves as the “private investment manager” to funds and managed accounts. A search of the SEC database for registered investment advisers didn’t locate any records for G Asset. He’s previously worked at Goldman Sachs Group Inc. and hedge funds Mercer Partners LP and the now defunct Pequot Capital Management Inc.
Glickstein reported in the filing that he paid as little as 5 cents for the option contracts, though it wasn’t clear if this was the exercise price for each share or the cost of each options contract. A single call option contract entitles an investor to buy 100 shares of a company’s stock at a set price in the future.
In general, options contracts that cover a longer period, such as a year, are more expensive than those that expire within a shorter time frame, say a month or two. Similarly, option contracts that entitle the holder to buy shares at or below the market price at the time are more expensive than out of the money options, the term for those whose exercise price is well above the current trading price.
G Asset’s funds include G Real Estate Partners LP, G Value Partners LP and G Value Fund LLC. G Real Estate filed documents with the SEC in July 2010 stating that the fund had raised about $1.6 million. G Value Partners said in February 2012, the same month that the group reported its Barnes & Noble stake, that it had raised about $1.8 million.
The firm’s current offer for 51 percent of Barnes & Noble would take about $673 million. Without a demonstration of funding, it’s hard to see how a deal could happen, said John Tinker, an analyst at Maxim Group in New York.
“He’s got no money,” Tinker, who has a buy rating on Barnes & Noble shares, said in a phone interview. “Money talks. Even Carl Icahn has to buy a piece of Apple before he can get breakfast or dinner with Tim Cook.”
Meanwhile, the Nook business continues to struggle. Barnes & Noble said this month that it would cut jobs as revenue at its Nook tablet unit continues to shrink. The company had reduced the tablet’s prices during the holidays, facing competition from Apple Inc.’s iPad and Amazon.com Inc. (AMZN:US)’s Kindle.
The company invested heavily in the Nook business in an effort to move away from physical books. The unit’s sales, which include tablets, content and accessories, sank 61 percent to $125 million in the nine-week holiday period, the retailer said in January.
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