Shares of Barnes and Noble, Inc. (BKS) ended the week on a high note after value-oriented investment firm G Asset Management proposed to acquire 51 percent of the retailer for $22 per share. The offer price puts a value of Barnes and Noble at $1.32 billion, about 30 percent above the value of the company at the time of the announcement.
The price is up from the $20 per share that G Asset, which is headed by Michael Glickstein, offered the company in November to buy a controlling interest in the struggling bookseller. G Asset also said late Thursday that it would buy 51 percent of Barnes and Noble's Nook segment for $5 per share. The investment firm believes that separating the unprofitable Nook operations from the profitable retail and college businesses would create "substantial shareholder value."
New York City-based G Asset views the company as significantly undervalued and that the sum of the parts is greater than the whole, based upon current market valuation.
Earlier this month, Barnes and Noble confirmed reports that it was laying-off staffers in its Nook unit, but spokeswoman Ellen Keating said that the company has no plans to exit the device market. No details of the layoffs were provided, but if the company isn't planning to ditch the Nook business, it apparently is continuing to search for a way to better balance costs amidst plunging sales.
Geekwire reported this week that Barnes and Noble yanked its $79 Nook Simple Touch e-reader from its online store. With the removal, the company effectively ceded the low-end e-reader market to Amazon (AMZN) , which sells its basic Kindle for the same price, to focus on its new Nook GlowLight (priced at $119).
Investors will be looking to see how well Nook sales went last quarter when the company releases its fiscal 2014 third quarter earnings before the market opens on Wednesday, February 26. In January, B&N said that Nook and accessory sales plunged 61 percent to $125 million during the nine-week holiday season. It's unlikely anyone will be holding their breath for a great Nook report. In the second quarter, Nook revenue was down by 32 percent compared to the second quarter a year earlier, easily the worst performing part of Barnes and Noble. B&N has been reporting its results from its Nook business independent of its retail business since 2012.
What happens with the Nook business is of particular interest to Microsoft (MSFT) . In April 2012, Microsoft disclosed a $300 million investment in Nook Media, an 18-percent stake. The company was valued at $1.7 billion at that time. In December 2012, Microsoft poured another $89.5 million into the unit. Rumors have swirled intermittently since that Microsoft will take a run at buying the Nook business as it focuses on widening its footprint as a devices and services company, but nothing has manifested and talks between B&N and Microsoft have reportedly stalled.
Wall Street likes to hear about Barnes and Noble possibly splitting-off its Nook business and today is no different. Shares closed trading on Friday at $17.70 for gains of 5.5 percent on the day. That's their highest closing price since August 15.