Will Leonard Riggio Buy Barnes & Noble, Inc. Now?

This could be the moment Barnes & Noble founder Leonard Riggio has waited for.

Jun 30, 2014 at 10:12AM

It's official. Only a few days ago -- and much to investors' delight -- Barnes & Noble (NYSE:BKS) finally confirmed plans to separate its money-bleeding Nook Media business from its slightly less unhealthy retail operations.

Barnes

Credit: Wikimedia Commons.

Upon reading the news, my mind shifted to one person: Leonard Riggio. He's Barnes & Noble's founder, chairman, and single largest shareholder. And I think soon, he could make a renewed move for Barnes & Noble's retail business.

Here's what brought us to this point
Remember, back in February 2013, Riggio made clear his intent to submit a proposal to acquire all the assets of Barnes & Noble's retail operations. That plan would have effectively left the unprofitable Nook business behind, allowing Riggio to focus the company's attention on propping up its more easily salvageable brick-and-mortar operations.

In the meantime, in May 2013, Barnes & Noble apparently came close to offloading Nook Media to Microsoft. The tech giant, for its part, had already plunked down over $300 million for a 17.6% stake in Nook Media in 2012 and was reportedly nearing a $1 billion offer to buy the remaining stake it didn't already own.

But when that didn't happen, and as the performance of both segments continued to spiral downward, Riggio ultimately suspended his quest to gobble up the best of Barnes & Noble last August. Perhaps also sensing an unnecessary distraction caused by his actions, Riggio stated that "it is in the company's best interests to focus on the business at hand." However -- and this is where last week's development gets really interesting -- Riggio still insisted he reserves "the right to pursue an offer in the future."

So where does that leave investors now?

Despite its losses, Barnes & Noble has certainly worked to maximize the value of Nook Media up until now. First, it reduced Nook Media's EBITDA losses to "just" $217.6 million in fiscal 2014, which was a massive improvement over Nook's jaw-dropping $480.4 million loss the previous year. Now, Barnes & Noble is in the process of shifting Nook Media's business away from its previous hardware-centric focus, and toward becoming a central platform for higher-margin digital content. 

Meanwhile, Barnes & Noble's retail business once again remained a quasi-bright spot last quarter, with "Core" comparable store sales -- which excludes sales of Nook products -- falling a manageable 1.9% year over year. Still, Retail achieved fourth-quarter EBITDA of $53 million, which was essentially flat over the same year-ago period.

When could it happen?
All things considered, Barnes & Noble's retail business appears to have plateaued, which lends credence to the company's assertions that it still has hope for maintaining sustained profitability over the long term. And for Riggio, I'd venture to guess the prospect of doing so in the private sector -- which means removing the pressure of appeasing Wall Street's fickle quarterly demands -- would seem all that much more attractive right now.

Of course, the absence of an interested buyer means Barnes & Noble is essentially "selling" Nook Media to shareholders. According to last week's press release, the separation of the two businesses is expected to be complete by the end of the first quarter of 2015. When that happens, don't be surprised if Barnes & Noble's founder makes his move.

Top dividend stocks for the next decade
But don't get me wrong. A buyout certainly isn't a sure thing, so you shouldn't base your entire investment thesis on it. In fact, if you'd like something a little more solid, there's a better place to put your money to work over the long term. The smartest investors know that dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Barnes & Noble and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers