12/2/2014

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Bill Ackman Tells Borders (BGP) To Bid $16

A Share For Barnes & Noble (BKS)
December 06, 2010

| About: BKS -5.01% BGP +0%

Both the New York Times and Wall Street Journal are reporting that Bill
Ackman is backing a $16 a share bid for Barnes & Noble (BKS). The
bidder would be Borders (BGP). The financier would be Ackman.
Ackman owns a large stake in Borders. Borders is the second largest
print book seller in the United States behind Barnes & Noble. The

Geoff Gannon

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combined company would be by far the biggest bookseller in the United

States.
Bill Ackman runs a hedge fund called Pershing Square.
As far as I can tell and this may change as the story develops none

of the news reports include any information not found in the report Pershing Square made to
the SEC. In other words, the reporters just found the filing and are regurgitating it. This will
probably change as they call people for comments.
For now all we have to go on is Bill Ackmans 13D.
So here it is I have replaced the legalese Reporting Persons with Pershing Square and
Issuer with Borders so you can read the damn thing:
(Pershing Square has) informed (Borders) that they would be prepared to finance, on
mutually acceptable terms, an offer by (Borders) to purchase all of the equity securities of
Barnes & Noble, Inc. (BKS) in an all-cash transaction valued at $16 per share. In the
alternative, (Pershing Square has) informed (Borders) that they would be prepared to finance,
on mutually acceptable terms, an offer for mixed stock and cash consideration, to the extent
BKS stockholders prefer to share in the substantial synergies of the business combination and
receive equity in the combined company.

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No assurance can be given that (Pershing Square) will reach an agreement with (Borders) on
the terms of a financing. Furthermore, the terms of the transaction (Pershing Square is)
prepared to finance may change. (Pershing Square reserves) the right to terminate
discussions with (Borders) at any time for any or no reason.
Im a Barnes & Noble shareholder.
If youve been following my Barnes & Noble articles you know I bought shares around
$15.36 a share initially, and have since bought a smidge more at lower prices. Overall
though my cost is around $15. So thats a pretty paltry 6% return if you followed me into the
stock. No reason to celebrate yet.
Barnes & Noble is tenuously controlled by Len Riggio. Riggio founded the modern day
Barnes & Noble. The name comes from elsewhere. Dont ask. Its not important.
Barnes & Noble is in the middle of auctioning itself off. At least thats the official line. But
recent reports in the New York Post suggested that process was close to dead. The Post said
neither Chairman Len Riggio nor activist investor Ron Burkle want to buy all of Barnes &
Noble. Each man controls about a third of the company.
Burkle only owns 20%. Theres a poison pill blocking him from buying more. Burkle has or
had an ally in another hedge fund. And a Burkle backed slate of board candidates lost to
Riggio in a closely contested election back in September.
What will Borders say to Ackman? What will Riggio say? What will Burkle say? And can either
Border or Barnes & Noble speak with one voice?
The answer to the first 3 questions is we dont yet know. The answer to the last one is
definitely not. These are 2 companies with big shareholders who wont always agree among
themselves or with outside investors.
And what will this do to Barnes & Nobles review of strategic alternatives?
Does this mean Barnes & Noble is in play?
If so that changes the Riggio control dynamic. If Borders bids that changes the equation for
Riggio, Burkle, and the Barnes & Noble board. Both financially and legally.

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So what now?
Well see. More on this story as it develops.
In the meantime you might want to read my own Barnes & Noble analysis. Like I said Ive
got skin in the game. Im definitely biased. Conflicts of interest abound, etc., etc.
I spread the analysis out over a few articles:
Why Would Anyone Buy Barnes & Noble (BKS) Stock at $16 a Share?
Who is Ron Burkle? Why Does He Want Control of Barnes & Noble (BKS)? And How Does
He Know Charlie Munger?
Who Will Win the Barnes & Noble (BKS) Proxy Fight? Ron Burkle? Or Len Riggio?
What Does Ron Burkle See in Barnes & Noble (BKS)?
Would Benjamin Graham Buy Barnes & Noble (BKS) Stock at $15 a Share? And How Would
He Analyze the Stock?

About the author:

Geoff Gannon
Geoff Gannon

Rating: 2.6/5 (7
votes)
Comments
Kidchoi - 3 years ago

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$16/share is chicken feed. Can't expect much else from Ackman. Of course my
comment is biased too since I"m a shareholder.

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