Barnes & Noble Files Plan for Spinning Off Campus Bookstores

Updated on

Barnes & Noble Inc. filed plans for the previously announced spinoff of its college unit, a move intended to help the largest U.S. bookstore chain focus on navigating a changing market.

Investors will receive 0.632 of a share of Barnes & Noble Education Inc. for each share of the bookstore chain that they hold, the New York-based company said today in a filing. Barnes & Noble plans to list the spinoff on the New York Stock Exchange under the symbol BNED. The company didn’t give a record date of ownership to be part of the distribution.

Barnes & Noble is spinning off the college unit so it can focus on strengthening its retail business, which has been hurt by the rising popularity of digital books and online shopping. The move also may help the college division drive sales gains because it can now seek acquisitions on its own.

“Pursuing such growth opportunities will be greatly facilitated with a capital structure that is tailored for the company’s needs, separate from those of Barnes & Noble,” the retailer said in the filing.

The spinoff is the culmination of a years-long effort to break up Barnes & Noble, which has fallen from a dominant force in bookselling to a company in survival mode thanks to the rise of Amazon.com Inc. For a time, there was speculation that it would divest its college and Nook digital divisions and keep the bookstores as a publicly traded company. Founder and Chairman Len Riggio also considered taking the retail stores and website private.

Spinoff Specialist

A driving force behind the change has been Michael Huseby, who was hired as chief financial officer in 2012 and promoted to chief executive officer last year. Huseby, who was tasked with overseeing the company’s capital structure, had spun off two units in his previous job with Cablevision Systems Corp. At the time he joined Barnes & Noble, some investors wanted to sell the fast-growing Nook division, which sold e-readers, tablets and digital content.

But the Nook’s promise quickly faded against competition from tech heavyweights like Apple Inc. and Samsung Electronics Co. Nook sales tanked, and CEO William Lynch was replaced by Huseby in January 2014.

The college unit runs 724 campus bookstores nationwide as of May 2, reaching about 24 percent of the U.S. college-student population. Barnes & Noble College doesn’t hold any leases, and instead enters multiyear agreements to operate stores. The schools then get a cut of the sales.

The spinoff was announced in February, and Barnes & Noble said at the time that it would complete the transaction by the end of August.

Stock Impact

Barnes & Noble shares fell 1 percent to $25.79 at the close. The stock has gained 11 percent this year. The company said it expects its shares to trade lower immediately following the spinoff because the price will no longer reflect the value of the college unit.

That division had sales of $1.77 billion and net income of $19.1 million in the fiscal year ended May 2, accounting for about 30 percent of companywide sales and half of profit. Earlier this month, Barnes & Noble said it expected comparable-store sales at the college unit to increase about 1 percent this year.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE