Thursday, March 26, 2020

Barnes & Noble College Stores Takes a Pill

News today that B&N have closed about half their stores.  That’s going to hurt.

On the education side (these are entirely separate businesses) the Barnes & Noble board are worried the company might be acquired for a song due to the very low share price and have implemented a poison pill defense.

This from Publisher’s Lunch today:

Barnes & Noble Education Adopts Poison Pill:
In early December Barnes & Noble Education announced they would hire a financial advisor to "review strategic opportunities" — e.g. help try to sell the company — following yet another disappointing quarter, and claiming "a number of unsolicited inquiries" in rescuing the company from the management that has run it down. On Wednesday, with the stock trading at deep lows over the past few 10 days in the wake of broad campus closures, BNED adopted a poison pill (aka "shareholder rights plan"), to make sure no one actually buys the stock thinking they could gain control of the company.

BNED said "the rights are designed to ensure that all of the Company’s stockholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against tactics to gain control of the Company without paying all stockholders a premium for that control." The pill kicks in if any person or group acquires 10 percent or more of the common stock.

That plan follows an SEC filing from Monday by competitor James Barnes at BBA Holding Corp. (and his wife), indicating that they had increased their holding of BNED stock modestly from a string of recent purchases. They own 6.40 percent of BNED shares now, up from just over 5 percent when they first were required to file in late October 2019. (That initial investment has lost millions of dollars in value so far.)

BNED had to update their "risk factors" in adopting the new rights plan, but their candor in the face of broad campus closures is underwhelming: "The recent outbreak of COVID-19, and any other outbreaks of contagious diseases or other adverse public health developments in the United States or other countries where we operate or our customers are located, could have a negative effect on our business, results of operations and financial condition. These effects could include disruptions or restrictions on our employees’ ability to work effectively, as well as temporary closures of our facilities, retail stores, and the institutions we serve. The extent to which COVID-19 could impact our business, results of operations and financial condition is highly uncertain and will depend on future developments."

Morgan Stanley is the bank conducting the sale.  In this environment it is going to be a difficult sell. 

How much the COVID-19 imposed change in behavior has pushed even more people (students) to web purchase and what the impact that will represent for campus stores may only be seen in the fall.  Hard to project revenues in that circumstance.

This is their share chart over the past five years – not so great.  You can see it has really tanked the past three months.

And here is their earning call transcript.

No comments: