Increases Customer Base and Distribution
Network, Adding More Than 700 Virtual Bookstores
Expands Addressable Market and Bookstore
Service Capabilities
Enhances Cash Flow to Support Growth
Barnes & Noble Education, Inc. (NYSE:BNED)
(“the Company” or “BNED”), one of America’s largest contract
operators of bookstores on college and university campuses and a
leading provider of digital education services, today announced
that it has acquired MBS Textbook Exchange, LLC (“MBS”) for $174.2
million in cash. Together, MBS and BNED will operate over 1,490
physical and virtual bookstores and serve more than 6 million
students enrolled in higher education institutions.
MBS is the largest contract operator of virtual bookstores for
the institutional client market and one of the largest used
textbook wholesalers in the U.S. Through its MBS Direct business,
MBS services more than 700 virtual bookstores with a comprehensive
e-commerce experience and a broad suite of affordable new, used and
digital course materials. MBS sources and sells new and used
textbooks to over 3,700 physical college bookstores, including
BNED’s 770 campus bookstores, and provides inventory management,
hardware and point-of-sale software to approximately 485 college
bookstores. It also operates textbooks.com℠, an e-commerce site for
new and used textbooks.
Max J. Roberts, Chief Executive Officer, Barnes & Noble
Education, Inc., said: “We have worked closely with MBS for over 30
years, and we are thrilled to bring our two complementary companies
together. This combination will allow us to generate more value
from the textbook marketplace through expected inventory and
procurement synergies, which will enhance our ability to drive
successful student outcomes by providing complete, affordable
solutions that empower students and faculty. In addition, we will
increase our addressable market to include the growing virtual
bookstore market, and will now be able to offer our campus partners
physical, virtual and hybrid bookstore models. Our ability to
leverage our expanded customer reach and distribution channels
gives us the opportunity to immediately accelerate our strategy and
provide scale benefits, an enhanced competitive advantage in the
rapidly changing higher education industry.”
For the MBS fiscal year ended August 31, 2016, MBS generated
revenue of approximately $499.8 million and Earnings Before
Interest, Taxes, Depreciation and Amortization (“EBITDA”) of
approximately $54.7 million, with capital expenditures of
approximately $1.8 million.1
Transaction Benefits
Management believes the transaction will enhance BNED’s
competitive positioning in the dynamic higher education industry as
follows:
- Enhances ability to customize
physical, virtual and hybrid models to meet customer needs:
MBS’s advanced capabilities will enable BNED to expand its
addressable market to include higher education institutions and
K-12 schools that need virtual bookstore solutions -- a growing
market segment with increasing demand and a key element of BNED’s
competitive strategy. Together, BNED and MBS can offer existing and
prospective clients physical, virtual and hybrid bookstore models,
and can enhance MBS’s existing virtual bookstore offering,
including using Promoversity, a custom merchandise supplier and
storefront solution.
- Enables BNED to generate more value
from the textbook marketplace: MBS’s wholesale distribution
channel and warehousing systems will enable BNED to optimize its
textbook sourcing, purchasing and liquidation processes. With MBS,
BNED will be able to more efficiently source and distribute a
comprehensive inventory of affordable course materials to customers
with the highest and greatest need.
- Expands customer base for digital
courseware and analytics: BNED will have new sales
opportunities for its suite of digital course materials and
platforms with MBS’s wholesale and virtual bookstore customers. The
expanded combined customer base will broaden BNED’s reach and
deepen its institutional partnerships through its ability to
provide unmatched access to affordable solutions.
- Delivers significant financial
benefits: The transaction is expected to be accretive to
EBITDA, net income and cash flow in Fiscal 2018 and is expected to
deliver operational synergies over time. BNED believes the
compelling financial benefits, including increased cash flow
generation, new revenue opportunities and operational synergies
will help deliver significant shareholder value. Importantly,
increased scale and cash flow generation will provide BNED with the
flexibility to pursue additional growth opportunities in the
rapidly changing higher education industry.
“We are excited to join a company that shares our commitment to
serving the education marketplace and driving student success,”
said Bob Pugh, Chief Executive Officer, MBS. “We are confident that
joining forces with Barnes & Noble Education will enable us to
serve the needs of our customers and partners even more effectively
and better meet the demands of the changing education landscape. We
look forward to being a member of the Barnes & Noble Education
family.”
Transaction Details
Prior to the acquisition, MBS was privately-held and
majority-owned by affiliates of Leonard Riggio, who also owns
approximately 16% of BNED’s outstanding shares. The BNED Board of
Directors established a Special Committee of the Board, comprised
solely of independent and disinterested directors, to evaluate the
MBS acquisition opportunity, negotiate the terms, and make a
recommendation to the BNED Board of Directors. The Special
Committee retained independent financial and legal advisors. Both
the Special Committee and the full BNED Board of Directors approved
the transaction unanimously. The transaction closed on February 27,
2017.
David Henderson has been named President of MBS and will report
to Patrick Maloney, Chief Operating Officer, Barnes & Noble
Education, and President, Barnes & Noble College. Bob Pugh, CEO
of MBS, and Dan Schuppan, President of MBS, have announced their
plans to retire as of March 31, 2017.
Concurrent with the signing of the definitive acquisition
agreement, BNED amended its credit facility to add a $100 million
seasonal provision, increasing the maximum availability under the
facility to $500 million, and borrowed approximately $55 million
under the facility to fund the acquisition. BNED expects borrowings
under the facility to vary from $0 to $250 million, reflecting
seasonality in the business over the next twelve months.
BNED expects to adjust the tax basis of MBS’s assets to their
fair market values, which is anticipated to result in significant
future cash tax savings.
Advisors
Guggenheim Securities served as financial advisor to BNED.
Evercore served as financial advisor and Gibson, Dunn &
Crutcher LLP served as legal counsel to the Special Committee of
BNED’s Board of Directors. Evercore delivered a fairness opinion to
the Special Committee in connection with the transaction. Peter J.
Solomon Company served as financial advisor and Bryan Cave LLP
served as legal counsel to MBS.
Conference Call Information
Barnes & Noble Education, Inc. also released today its third
quarter 2017 financial results. BNED will discuss the transaction
during its previously scheduled conference call to discuss its
third quarter fiscal 2017 results today at 10:00 a.m. ET. The
conference call can be accessed via a live webcast at
www.bned.com/investor or by dialing (866) 564-7431 and entering
passcode 497354. A replay of the call will be available through
March 7, 2017 via webcast at www.bned.com/investor or by dialing
(866) 564-7431 and entering passcode 1289119. An investor
presentation with additional information on the transaction will be
posted to the Barnes & Noble Education, Inc. website
(www.bned.com/investor) prior to the conference call.
About Barnes & Noble Education, Inc.
Barnes & Noble Education, Inc. (NYSE: BNED), one of the
largest contract operators of bookstores on college and university
campuses across the United States and a leading provider of digital
education services, enhances the academic and social purpose of
educational institutions. Through its Barnes & Noble College
and MBS subsidiaries, Barnes & Noble Education operates 1,490
physical and virtual bookstores and serves more than 6 million
students enrolled in higher education institutions, delivering
essential educational content and tools within a dynamic retail
environment. Through its Digital Education subsidiary, Barnes &
Noble Education offers a suite of digital software, content and
services that include a sophisticated digital learning management
platform that has competency-based features, analytics
capabilities, courseware offerings and a digital eTextbook reading
product. Barnes & Noble Education acts as a strategic partner
to drive student success; provide value and support to students and
faculty; and create loyalty and improve retention, all while
supporting the financial goals of college and university
partners.
General information on Barnes & Noble Education, Inc. can be
obtained by visiting the Company's corporate website:
www.bned.com.
About MBS Textbook Exchange, LLC
As of February 27, 2017, MBS Textbook Exchange, LLC is a
wholly-owned subsidiary of Barnes & Noble Education, Inc. MBS
is the largest contract operator of virtual bookstores for the
institutional client market and one of the largest used college
textbook wholesalers, bookstore systems providers, and distributors
of direct-to-student course materials in the nation. Through its
virtual bookstore solutions, MBS is an industry leader in course
material fulfillment solutions, and serves K-12 and higher
education institutions in North America and students around the
world. MBS's primary goals are to provide its partner schools with
leading technology and superior knowledge of the textbook industry
to simplify course material fulfillment and increase options while
lowering costs for students.
Forward-Looking Statements
This press release contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and information relating to us and our business that are
based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used
in this communication, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,”
“projections,” and similar expressions, as they relate to us
or our management, identify forward-looking statements. Moreover,
we operate in a very competitive and rapidly changing environment.
New risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this press
release may not occur and actual results could differ materially
and adversely from those anticipated or implied in the
forward-looking statements. Such statements reflect our current
views with respect to future events, the outcome of which is
subject to certain risks, including, among others: general
competitive conditions, including actions our competitors may take
to grow their businesses; a decline in college enrollment or
decreased funding available for students; decisions by colleges and
universities to outsource their bookstore operations or change the
operation of their bookstores; the general economic environment and
consumer spending patterns; decreased consumer demand for our
products, low growth or declining sales; our ability to
successfully integrate the operations of MBS into our Company; the
anticipated benefits of the MBS acquisition may not be fully
realized or may take longer than expected; the integration of MBS’s
operations into our own may also increase the risk of our internal
controls being found ineffective; restructuring of our digital
strategy may not result in the expected growth in our digital sales
and/or profitability; risk that digital sales growth does not
exceed the rate of investment spend; the performance of our online,
digital and other initiatives, integration of and deployment of,
additional products and services, and further enhancements to Yuzu®
and any future higher education digital products, and the inability
to achieve the expected cost savings; our ability to successfully
implement our strategic initiatives including our ability to
identify and execute upon additional acquisitions and strategic
investments; technological changes; our international expansion
could result in additional risks; our ability to attract and retain
employees; changes to payment terms, return policies, the discount
or margin on products or other terms with our suppliers; risks
associated with data privacy, information security and intellectual
property; trends and challenges to our business and in the
locations in which we have stores; non-renewal of contracts and
higher-than-anticipated store closings; disruptions to our computer
systems, data lines, telephone systems or supply chain, including
the loss of suppliers; work stoppages or increases in labor costs;
possible increases in shipping rates or interruptions in shipping
service, effects of competition; obsolete or excessive inventory;
product shortages; changes in law or regulation; the amount of our
indebtedness and ability to comply with covenants applicable to any
future debt financing; our ability to satisfy future capital and
liquidity requirements; our ability to access the credit and
capital markets at the times and in the amounts needed and on
acceptable terms; adverse results from litigation, governmental
investigations or tax-related proceedings or audits; changes in
accounting standards; challenges to running our company
independently from Barnes & Noble, Inc. following the Spin-Off;
the potential adverse impact on our business resulting from the
Spin-Off; and the other risks and uncertainties detailed in the
section titled “Risk Factors” in Part I - Item 1A in our Annual
Report on Form 10-K for the year ended April 30, 2016. Should one
or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results or outcomes
may vary materially from those described as anticipated, believed,
estimated, expected, intended or planned. Subsequent written and
oral forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by
the cautionary statements in this paragraph. We undertake no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise after the date of this press release.
______________________
1 Financial information for MBS was
derived from MBS’s audited financial statements for the fiscal year
ended August 31, 2016, and includes revenue associated with
transactions between BNED and MBS, but has been adjusted to exclude
income and expenses related to certain contracts that expired prior
to the acquisition date.
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version on businesswire.com: http://www.businesswire.com/news/home/20170228005977/en/
Media:Barnes & Noble Education, Inc.Carolyn J. Brown,
908-991-2967Vice PresidentCorporate
Communicationscbrown@bned.comorInvestors:Barnes & Noble
Education, Inc.Thomas Donohue, 908-991-2966Vice PresidentTreasurer
and Investor Relationstdonohue@bned.com
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