Bookstore giant turning the page

NEW YORK – Book retailer Barnes & Noble Inc. said its shares have slumped so low it may put itself on the block – possibly selling the chain to an investment group that would include its founder and biggest shareholder, Leonard Riggio.

The world’s largest bookseller said late Tuesday that its board is evaluating several options to boost shareholder value in the face of a depressed stock price, including selling the company. Riggio, who holds some 28 percent of the company’s shares, said he’s considering joining an investor group to buy the retailer.

Shares soared on the news in after-hours trading Tuesday, rising $3.31, or nearly 26 percent, to $16.15. Shares closed the regular session down 98 cents, or 7 percent, at $12.84. The stock has been in free fall since late June, when the company reported a steep fourth-quarter loss and issued forecasts for first-quarter and full-year net income below expectations.

Barnes & Noble has been hurting, along with other book retailers, as people focus on essentials in the down economy and limit their book purchases. Shoppers also are shifting away from paper books toward electronic books, much as they have done with music, moving away from CDs toward digital downloads.

Barnes & Noble has been bullish on the future of digital books and introduced its Nook e-reader and its online e-bookstore last October, well ahead of rival Borders Group Inc. It has been engaged in price wars with Borders and Amazon.com to attract readers to this new market.

It’s not clear why Barnes & Noble, which is not hurting as much as Borders, made such an announcement, said Michael Norris, a senior analyst at Simba Information.

“There are companies that do this because they have to and there are companies that do this because they have impatient shareholders, and I’m not sure what’s driving this kind of statement,” he said. “It just seems daft.”

Norris said any bump in stock price on the news could be temporary if Barnes & Noble continues its lackluster results and fails to find a buyer.

Borders, the nation’s second-largest book retailer, also has been struggling with falling demand and increasing competition from discounters such as Wal-Mart Stores Inc. and online booksellers. It has been more deeply hurt than Barnes & Noble, but the company has been cutting costs and improving its business. It has been hoping to reinvigorate itself with a $25 million investment from financier Bennett LeBow – who became the company’s largest shareholder and chairman and later was named CEO.

Barnes & Noble said a committee of four directors will evaluate its options. The committee has selected Lazard as its financial adviser and Morris, Nichols, Arsht & Tunnell LLP as its legal adviser.

Riggio said no matter what happens he is “eager to remain with the company and see it through the challenging years ahead.” He first started the business with a college bookstore in 1965.

The New York-based company operates 720 stores in 50 states. The board said there was no specific timeline for the review.