A bookstore chain transformed into a warm local merchant

A once antiseptic, corporate-backed bookstore chain is to be transformed into a new warm and cuddly local merchant. And a hard-charging hedge fund is going to make it happen. Yesterday, Elliott Management… said it would acquire Barnes & Noble at a transaction value of just under $700 million. Elliott in 2018 acquired Waterstones, the UK bookseller chain in the middle of a solid turnround. Elliott can now wring out efficiencies from the pair as well as apply lessons learnt in brick-and-mortar retailing. Still, Elliott remains a savvy financial player. Its premium purchase price reflects only a multiple of 4.5 times ebitda… Barnes has been through a dizzying array of strategies in recent years. Among its moves, it created an ereader, Nook, that attracted such investors as Microsoft, Liberty Media and Pearson. In 2015 it spun-off its legacy college bookstore chain… Yet its steady loss of sales never abated… For a private owner like Elliott, Barnes’ meaningful operating cash flow reduces its risk. But it also believes that the formula that has worked at Waterstones — allowing local stores the flexibility to operate with autonomy — can be applied across the Atlantic… Should Elliott succeed in creating a viable rival to Amazon, it will be a formidable achievement. Executing a complex operating turnround is perhaps a tale worthy of hardback treatment.