Activist investor Tom Sandell, a well-known hedge fund manager, is seeking to have Barnes & Noble Inc. (BKS) , the nation's sole "brick and mortar" book retailer, hire an investment bank and sell itself.
Sandell and his fund, Sandell Asset Management LLC, have frequently sought to install director candidates at targeted companies to drive an M&A agenda. The insurgent fund, which launched its campaign on Tuesday, likely has until mid-August to nominate dissident directors.
Also, Sandell doesn't usually launch an M&A driven activist campaign without first considering whether there would be companies interested in buying the business, which has a $590 million market capitalization. At Barnes & Noble, there is a hodgepodge of conventional and unconventional buyers that could seek to purchase its 633 U.S. stores.
Barnes & Noble fits within a broader category of companies that activists acknowledge are in industries experiencing a secular decline, though they believe the market is overreacting to that decline so they would work better as private businesses.
The most likely buyer could be the retailer's chairman, Leonard Riggio, who considered forming an investment group in 2013 to buy the business. Sandell noted that Riggio could take the company private in a leveraged acquisition "at a fair price for public shareholders." Sandell pointed to the Riggio's sale of his college book business to BKS for more than $500 million, to suggest that Riggio has the resources for such a leveraged buyout.
Also, some private equity firms could make a play. Sandell estimates that a private equity firm could pay more than $12 a share, 50% higher than its recent stock price of $8.02 a share. Buyout shop Sycamore Partners LLC's proposed acquisition of Staples shows that deals to acquire retail operators are alive and well.