Barnes & Noble considers selling itself

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Bookstore behemoth Barnes & Noble Inc., facing tough competition from online retailers and a free-falling stock, said Tuesday that it was considering selling itself.

The New York company said it was putting together a special committee to “evaluate strategic alternatives” to boost its “significantly undervalued” shares.

Shares surged 26% in after-market trading to $16.17 after closing down 98 cents, or 7.1%, at $12.84. The stock has nose-dived since April, when the price was hovering around $25.

The bookseller’s vulnerability has already captured the attention of Los Angeles billionaire and celebrity hobnobber Ron Burkle, a major stakeholder who has been making moves to increase his roughly 19% stake in the company.

The former supermarket magnate has slammed the bookseller’s current management while aggressively buying up shares.

His investment firm Yucaipa Cos. sued Barnes & Noble in May in an attempt to dismantle the company’s poison-pill policy, which tries to prevent hostile takeovers by banning investors from hoarding more than 20% of its shares without approval from the board. Barnes & Noble Chairman Leonard Riggio, who holds about a 30% stake, testified last month in a Delaware trial that he and his advisors had discussed how to thwart Burkle’s tactics.

The special committee to review a possible sale will consist of four independent directors who will consider various options before making a recommendation, the company said. It did not provide a set timeline.

In making the announcement, the company also said that Riggio was thinking of joining an investor group to buy the book retailer.

With 300 million online and in-store book sales each year, Barnes & Noble is the world’s largest bookseller. The chain operates 720 stores around the country.

But that hasn’t helped keep the company from being battered by penny-pinching customers drawn to rivals such as Inc. and Wal-Mart Stores Inc. And even with its Nook e-book, Barnes & Noble has struggled against digital books such as Amazon’s Kindle and Apple Inc.’s iPad.

Barnes & Noble posted $5.8 billion in sales for fiscal 2010, with in-store sales falling 4.8% from the previous year. The company said during its June earnings release that it expected in-store sales to range from being flat to being up 3% in fiscal 2011.