Don't Read Into Barnes & Noble's New Deal

NEW YORK (TheStreet) -- Shares of Barnes & Noble (BKS) closed up more than 5% Friday on news that G Asset Management, a private investment company, offered to buy 51% of the struggling bookseller at $22 per share. This represents a 24% premium from Barnes & Noble's Friday close at $17.69 per share.

It's also been reported that G Asset Management wants 51% of Barnes & Noble's Nook business, which places a price tag on that unit at $5 a share. G Asset Management believes that "substantial shareholder value" would be created if the Nook business were to operate separately from the book business.

I have to ask: has G Asset Management read Barnes & Noble's last four earnings transcripts?

Sales have plummeted over the past twelve months. And it has been even worse at the Nook segment. Struggling to compete with Apple's (AAPL) dominant iPad and Amazon's (AMZN) Kindle, Nook sales nosedived more than 60% this past holiday season compared to the year before.

What sort of upside does G Asset Management see in anything associated with Barnes & Noble that the rest of market does not?

If you recall, back in November, G Asset Management (then) made an initial offer for Barnes & Noble at $20 per share. At this rate, if Barnes & Noble shareholders continue to play hardball, the Street can expect an offer of, say, $24 per share in May.

Look, this is getting ridiculous. We've been down this road before. We know Barnes & Noble can't survive as a self-sustaining entity. Management has made this clear when they put the company up for sale in 2010. Nothing has ever come out of it.

In May 2011, media conglomerate Liberty Media (LMCA) was first to raise its hands in this auction, offering just over $1 billion for Barnes & Noble, or at $17 per share. This was (then) a 20% premium to the stock's last closing price.

In February of that year, rival Borders filed for bankruptcy. Smelling blood, John Malone, Liberty's chairman, felt it was the ideal time to strike. As with G Asset Management, Liberty was intrigued by Barnes & Noble's "advances" in the digital direction. Malone saw value potential in combining Liberty's strong media assets with Barnes & Noble's e-book business.

Malone, who has been likened to a Warren Buffett, was considered by analysts as an "unexpected but sensible suitor." Some suggested that Liberty, which was (then) putting up $500 million cash in the deal, was giving Barnes & Noble a great option for survival. Outside of a mere $204 million position, nothing meaningful has happened.

Next came Microsoft (MSFT), which invested $300 million into Barnes & Noble, or roughly an 18% stake in the Nook business. Barnes & Noble certainly had plenty of use for the cash. But does anyone really know what Microsoft received in this deal?

Last I checked, beyond the release of the Nook app for Windows 8, a significant portion of the Nook hardware is still being powered by Google's (GOOG) Android platform, not Windows. $300 million and an 18% stake still couldn't cut Google out.

Microsoft failed to offer any rationale for its investment. And the Nook business today is arguably worse off than when Microsoft first stepped in.

Look, there's no denying that Barnes & Noble still has some value. But beyond a best guess, no one really knows what that value is.

G Asset Management disagrees. But I haven't found any analyst today willing to bet her or his reputation on predicting Barnes and Noble's future. Not when Amazon is discussing drones.

Beyond placing the Nook in every cereal box or getting it to write a term paper, no one's going to be interested. And up to this point, the company's management has proven incapable of dictating its next great chapter.

Barnes & Noble investors deserve a novel idea. And this "new deal" isn't it.

At the time of publication, the author was long AAPL but held no positions in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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