Could B&N Buy Waterstones?

Could B&N Buy Waterstones? Bookstore Rumors Late last week Barnes & Noble dropped a few hints that they might be partnering with Waterstones to bring the Nook ereader into the UK.That's good news for UK ebook buyers, and great news for B&N, but there could be more to the story. Today I've heard the most interesting supposition. My source tells me that the B&N-Waterstones deal is almost a guarantee, but he goes one step further.

He thinks B&N could end up buying Waterstones. I think it's a crazy idea, but there is some merit to it.

Barnes & Noble is not opposed to buying their way into a business. Remember, they bought Fictionwise and eReader way back when, and then used those companies as a platform to launch the Nook. B&N also owns Tikatok, a service that encourages children to write their own stories. You might recall that some time back tikatok released an app exclusively for the NookColor.

So this idea isn't entirely out of the question. And it would give B&N a solid established presence in the UK book market. They wouldn't just be an outsider, like Amazon; B&N would have established a desire to be a partner to UK publishers and authors.

But I don't see it happening. Frankly, B&N doesn't have the funds to buy Waterstones - not if they want to use those founds to  expand their digital business. And I would think that B&N already knows that digital is the future, not opening more storefronts internationally. (Actually, Borders went that route and virtually all the stores Borders opened in the US, UK, and Australia have since gone bankrupt and closed.)

Now, B&N could go for a stock swap, but I doubt that would appeal to Waterstones' Russian investors. They've sunk £53 million into Waterstones, and we don't know if they want to trade that for a bigger but riskier chunk of B&N - a company that hasn't turned a profit in a couple years now.

But it's an interesting idea, isn't it. Do you think it could happen?

Nate Hoffelder

View posts by Nate Hoffelder
Nate Hoffelder is the founder and editor of The Digital Reader: He's here to chew bubble gum and fix broken websites, and he is all out of bubble gum. He has been blogging about indie authors since 2010 while learning new tech skills at the drop of a hat. He fixes author sites, and shares what he learns on The Digital Reader's blog. In his spare time, he fosters dogs for A Forever Home, a local rescue group.

10 Comments

  1. Barnes & Noble To Buy Waterstone’s..Maybe - Happy Joliver Publishing19 December, 2011

    […] interesting article on The Digital Reader suggests that Barnes & Noble could buy Barnes & Noble. Nate […]

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  2. Alexander Inglis19 December, 2011

    “Frankly, B&N doesn’t have the funds to buy Waterstones – not if they want to use those founds to expand their digital business.”

    That’s sort of contrary to your headline, right?

    It’s also the reason B&N will NOT buy Waterstone’s. The last thing they need is another bricks and mortar albatross. Doing some kind of digital Nook partnership deal — sure. But it’s kind of hard to buy another bricks and mortar enterprise when it is already losing money running 1300+ stores in the US.

    Reply
    1. Peter19 December, 2011

      Alex-

      According to Barnes and Nobles SEC filings, the stores (both college and retail) are still making a good amount of money.

      The losses are coming entirely from BN.com.

      Reply
  3. Peter19 December, 2011

    Barnes and Noble doesn’t have the cash on hand to buy Waterstone’s- but Liberty Capital does. And any acquisition deal by Barnes and Noble would require approval from Liberty Capital anyways. So I don’t think financing for this would be a deal-breaker.

    And traditional brick-and-mortar stores are going to be an important part of Barnes and Noble’s strategy going forward- the big question is what (books, nooks, cafe items, or something else entirely) they’ll be selling, not where. So they could use the real estate.

    That being said- I think if this did happen, it would be separate from the nook deal and would probably occur at a later date. Barnes and Noble is seeking to expand the nook internationally in several countries- not just the U.K.- France and Germany have been mentioned as well.

    So unless they are going on a bookstore buying spree all around the world this Christmas – I think this will mean retail partnerships- for now.

    Reply
  4. Mike Cane20 December, 2011

    I really doubt B&N would buy Waterstone’s. B&N has too many challenges here to stay afloat without adding having to learn the ways of book retailing in another country. And Waterstone’s has its own messes to sort out. Being bought by B&N would only add to their problems.

    Reply
  5. Alexander Inglis20 December, 2011

    Liberty Capital has lots of money however it has stated it’s interest in B&N is strictly on the digital side.

    We can agree to disagree on the view that B&N is “making a good amount of money” on its retail and college divisions based on SEC filings. The very fact that B&N was up for sale for almost a year and attracted zero buyers tells you something of the health of the enterprise.

    Reply
    1. Peter20 December, 2011

      Alex-

      I don’t mean to be argumentative- but I’m not sure this is an “agree to disagree” situation. It’s a fact.

      Per the companies 10-K filing, in the most recent fiscal year (the twelve months ending April 30, 2011:

      BN retail earned a profit of $90,984,000
      BN college earned a profit of $76,293,000
      BN.com generated a loss of $232,536,000

      This includes all selling, general, and administrative expenses, as well a depreciation and amortization.

      In the first two quarters of this fiscal year

      BN retail earnings INCREASED $42,248,000 over the prior year’s quarters
      BN college earnings decreased $3,595,000 compared to the prior year’s quarters
      and
      BN.com earnings decreased $28,313,000 compared to the prior year

      Draw whatever conclusions you would like to from this information- and feel free to speculate about the future of the company in any direction you want- but it is what it is.

      For Barnes and Noble- in 2010/2011, traditional retailing was a profitable business, ebooks and online book sales were an expenditure. And the trend in 2011 has so far only made this more pronounced.

      Reply
  6. […] to get a little closer than we expect. A few weeks back I reported that one source had told me that B&N might buy Waterstones. Now I would argue that the deal could go the other way. Waterstones might buy into the Nook […]

    Reply
  7. […] a resurgence. Today’s round of rumors doesn’t add anything that we hadn’t heard the last time around, and to be honest I think we ll pretty much assume them to be true.But have you considered that […]

    Reply
  8. […] because even senior folks from Barnes & Noble have hinted at it. I’ve heard rumors of B&N buying Waterstones. And B&N has even held a workshop in London for developers. And they’ve gone so far as to […]

    Reply

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