Shares of Barnes & Noble (NYSE: BKS), the largest bookstore chain in the U.S., jumped, Wednesday, on news that it has put itself on the block and could go private if its founder wins the bid. However, analysts warned that the company may find few takers.

Barnes & Noble, whose hardcover book sales have been dented by growing popularity of e-books, put itself on the block Tuesday and is expected to receive a bid from its founder and top shareholder Leonard Riggio, who wants the company to go private. Reports are making rounds that Riggio is mulling joining an investor group for making the bid.

The bookstore chain is also expected to evince interest from prominent investors such as billionaire Ron Burkle, who holds 19 percent stake in the company. Burkle has criticized the bookseller's current board of directors and has been aggressively buying up the company's shares recently.

However, Burkle is expected to face stiff resistance from Riggio, who holds 30 percent stake. Riggio had testified last month in a Delaware trial that he and his advisers had discussed how to thwart Burkle's tactics, including implementing a poison-pill policy that prevent hostile takeovers by banning investors from owning more than 20 percent of its shares without approval from the board.

Smaller rival Borders Group (NYSE: BGP), which is also looking for ways to shore up its balance sheet, could also join the bidding fray in hopes of merging forces with Barnes & Noble.

Morningstar analyst Peter Wahlstrom said Barnes & Noble would be able to turnaround faster if it went private because going private would allow the company to invest more quickly in its digital and e-book platform, which should help it compete more effectively.

Jennifer Herber, managing director investment banking at Stephens Inc., agrees. According to Herber, "Barnes & Noble is at a crossroads," and "taking the company private is the way to go."

Meanwhile, the news that Barnes & Noble is up for sale bumped up the company's shares by nearly 30 percent on Wednesday during pre-market trade. The company's shares closed up 19.24 percent at $15.31 on the bourse.

Market analysts said Barnes & Noble may have found it difficult to survive in an evolving world where hardcover books have given way to e-books, a market segment dominated by (Nasdaq: AMZN) and Apple (Nasdaq: AAPL).

The bookseller's e-reader Nook, despite having impressive features and being attractively priced, has also found few takers and lags Amazon's ultra-cheap e-reader Kindle and Apple's tablet computer iPad, which are registering roaring sales. Barnes & Noble said it controls 20 percent of the e-book market, a far cry from Amazon, which reportedly controls 60-70 percent of the market.

To adapt to the changing market, Barnes & Noble acquired Fictionwide, an online e-book retailer, last year. Earlier this year, in March, it also promoted William Lynch, head of its online division, as its new chief executive.

However, hit by intense competition, Barnes & Noble reported a higher-than-expected loss of $32 million in the fiscal 2010 fourth quarter ended May 1, even as sales in namesake stores open at last a year dropped 3.1 percent. The company also gave muted guidance for the current fiscal year, saying it expected in-store sales to range from being flat to being up 3 percent in fiscal 2011.

The company, which went public in 1993 and currently has 720 outlets in the U.S., also saw its shares drop more than 70 percent over the past four years as cheaper digital books eroded its traditional bricks-and-mortar business, rendering the company significantly "undervalued."

Not surprisingly, Barnes & Noble said, Tuesday, it was putting together a special committee of independent directors to "evaluate strategic alternatives" to boost its "significantly undervalued" shares, including a possible sale. The company, which has selected Lazard to serve as its financial adviser, and Morris, Nichols, Arsht & Tunnell LLP as its legal adviser, did not set a timeline.

However, despite evincing initial interests, the bookseller may find few takers, analysts said.

While Goldman Sachs analyst Matthew Fassler said that prospective bidders could be turned off by the "sizable investments associated with the transition to digital books, and risks to store profitability," Credit Suisse analyst Gary Balter said Barnes & Noble will find difficulty in getting a buyer "as long as it's primarily a brick & mortar retailer, and that business remains pressured."

"It's difficult to envision a buyer of this company given the structural issues it continues to face," Balter said.

Forrester Research analyst James McQuivey also wondered whether the timing of Barnes Noble's announcement is poor. "Putting Barnes & Noble on the auction block at this point seems a bit poorly timed since it doesn't allow the company to see what the long-term effect of the Nook's success will do for its future prospects," McQuivey said.

"Perhaps things are worse in bricks-and-mortar than we assume and they can't wait for Nook to mature," he added.

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