The announcement on Tuesday that “Barnes & Noble Is Putting Itself Up For Sale” pretty much set Twitter on fire last night. Where had this even come from? We thought Borders was the one in trouble!
Make no mistake, Borders is still in trouble. But the state of Borders has nothing to do with B&N’s pondering as to whether or not to sell itself.
The state of ebooks has nothing to do with B&N’s pondering as to whether or not to sell itself.
And the wild speculation that perhaps Borders will buy B&N, or Amazon, is patently nuts. Amazon has no desire to bog itself down in a brick-and-mortar business. Borders has enough on its plate (and getting the board to authorize such a purchase would put even Lebow’s formidable skills to the test).
This is not about the sale of B&N. This is about Ron Burkle and Len Riggio.
Barnes & Noble has been a family business since Len Riggio bought it in the 1970s. Many executives and board members have been there for decades, and have worked very closely with Len and his brother Steve as they built up the business from some college bookstores to a nationwide superstore chain to an online presence that – while not exactly giving Amazon a run for its money – nevertheless offers reliable access to millions of books, well-written reviews by professional reviewers, and great delivery and return options.
Disclaimer: I used to work there. For three years, I managed the database that powered both the stores and the website. I experienced the corporate cultures of both Inc. and .com, as they were called internally – the corporate cultures of Len and Steve. The Riggios make a very big distinction between who’s family and who’s not.
Burkle is not.
In aiming for a majority share in B&N, he’s overreaching. You don’t overreach with the Riggios. When you do, you get spanked.
But of course Burkle does not like being treated like a child who doesn’t know proper limits.
Is Riggio cutting off his nose to spite his face? On the face of it, the situation appears to be one of “If I can’t have control, we’ll sell it.” But let’s look a little deeper.
Last summer at this time, Barnes & Noble bought B&N College from Len Riggio. In fact, Len loaned B&N $250 million for that sale. So B&N is already in the hole to Len for that amount.
If Len and Steve form an investment group (with others, of course), which then turns around and buys B&N, essentially taking it private, the actual price of B&N to Len might well be reduced by $250 million. It would NOT be reduced to anyone else, and B&N would still be in that much debt to its founder even if someone else bought it. Not a comfortable situation for a prospective buyer.
The Riggios are perfectly positioned to do this. To an observer who knows how they run their companies, it seems highly likely that they will.
And then? Then things continue to develop the way the Riggios want them to – much the same as they are developing now.