Reuters: Global Markets: Barnes & Noble stock soars as hedge fund buys stake

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Barnes & Noble stock soars as hedge fund buys stake Apr 23rd 2012, 19:25 By Phil Wahba Mon Apr 23, 2012 3:25pm EDT (Reuters) - Barnes & Noble Inc (BKS.N) shares rose as much as 16.8 percent on Monday after a U.S. regulatory filing showed that New York-based activist hedge fund Jana Partners LLC had taken a large stake in the bookstore chain. Jana Partners, known for pushing for changes at the companies it invests in, had bought 6.96 million shares earlier in April, giving it an 11.6 percent stake, the company disclosed in a filing with the U.S. Securities and Exchange Commission late Friday. That is enough to make Jana the third-largest shareholder in the bookstore chain, after Barnes & Noble founder and Chairman Leonard Riggio and Ron Burkle's Yucaipa Cos investment firm. Barnes & Noble said in January, after lowering its full year sales and profit forecasts, that it might spin off the Nook digital books and e-reader business, claiming it wanted to "unlock" the value of that unit. Jana has pressured other companies to separate business units in an effort to realize more value. Jana made headlines last year when it pushed for McGraw-Hill Cos Inc (MHP.N), which owns Standard & Poor's credit ratings business, textbook publisher McGraw-Hill Education, and assorted information businesses, to split itself up. In late 2011, Jana took a 5 percent stake in Marathon Petroleum Corp and had discussions with management about strategy, asset structure and buybacks. A Jana spokesman did not immediately return a request for comment on the fund's intentions for its Barnes & Noble shares. But the stock's rally showed that many investors agree it is undervalued, one analyst said. "Jana has a solid reputation in the investing community and their involvement in (Barnes & Noble) is generally seen as an endorsement of the upside potential," Morningstar analyst Peter Wahlstrom. Barnes & Noble has staked out a share of the growing e-books industry, helping to offset declining book sales and competition from Amazon.com Inc (AMZN.O). But developing its Nook digital reader business has been expensive and taken a toll on its results. Riggio holds 29.8 percent of Barnes & Noble's shares, while Yucaipa owns 19.8 percent, according to Thomson Reuters data. Burkle waged but lost a proxy fight for a seat on the retailer's board in September 2010. Barnes & Noble's poison pill, put in place in 2009 after Burkle bought a large stake in the company in a matter of days, is still in place and limits any one investor's stake to 20 percent, except for Riggio. In 2010, the retailer put itself up for sale but found no buyer. Last May, John Malone's Liberty Media proposed to buy the chain for $1 billion, or $17 share, but ended up investing $204 million for preferred shares it can convert into a 16.6 percent stake at a strike price of $17. Barnes & Noble shares were up 16.8 percent at $13.25 in late afternoon trading. (Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn and Richard Chang) Link this Share this Digg this Email Reprints

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