(Bloomberg) -- Barnes & Noble Inc. said it doesn’t consider a buyout proposal from Sandell Asset Management as “bona fide,” doubting the activist investor’s ability to raise financing for the bid and get the bookseller’s chairman on board.
The retailer’s shares earlier jumped the most in more than four years after Sandell put forth a proposal to take the company private.
“The company does not take Sandell’s proposal as bona fide,” Barnes & Noble said in a statement, confirming the approach and noting Sandell only owns about 1 million shares of its common stock.
Barnes & Noble earlier spiked as much as 19 percent, the biggest intraday jump since May of 2013, to $7.85 before trading was temporarily halted. The bookseller’s shares were up 7.1 percent at 3:36 p.m. in New York, valuing it at about $501 million.
Sandell sent a letter to Barnes & Noble detailing a plan that would value the retailer at about $750 million including debt, according to a person familiar with the matter. The equity component of the offer amount is about $666 million, or $9.17 a share, the person said.
Sandell said in the letter it believes it could arrange about $500 million to fund the deal, the person said, asking not to be identified because the details aren’t public. No financing agreements are in place yet, the person said. The proposed transaction would allow certain holders to participate in the privatization and wouldn’t require substantial changes to the company’s management or operations, the person said.
Sandell believes the under-levered nature of Barnes & Noble would make it a better financing candidate than other retailer, the person said.
Barnes & Noble said the transaction as proposed would require the company’s chairman, Leonard Riggio, to roll over his 18 percent stake in the company. Riggio has no intention of doing so, the company said, adding that a debt financing of $500 million is “highly unlikely.”
Riggio is Barnes & Noble’s largest shareholder, according to data compiled by Bloomberg. BlackRock Inc. is the second-largest shareholder with a 10 percent stake, the data shows.
A representative for Sandell declined to comment.
Sandell disclosed a position in the New York-based company in July and urged it to explore sale. It said at the time it believed the company could fetch $12 a share if it were sold. Sandell owned about 1.4 percent of Barnes & Noble as of Sept. 30, according to data compiled by Bloomberg.
Barnes & Noble previously put itself up for sale in 2010 after pressure from activist investor Ron Burkle. Liberty Media Corp. invested $204 million in the company in 2011 after withdrawing a proposal to acquire the whole company.
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