BNED to Receive $95 Million of New Capital
Through $50 Million Equity Investment and $45 Million Fully
Backstopped Equity Rights Offering Led by Immersion Corporation
Eliminates Approximately $34 Million of Debt
Through Equitization of Second Lien Term Loan, Reflecting Strong
Support of Key Strategic Partners
Secures Commitment to Refinance Four-Year Asset
Backed Loan Facility to Provide Greater Financial and Operational
Flexibility
Barnes & Noble Education, Inc. (NYSE: BNED) (“BNED” or the
“Company”), a leading solutions provider for the education
industry, today announced that it has entered into a definitive
agreement with Immersion Corporation (NASDAQ: IMMR) (“Immersion”),
and certain of the Company’s existing shareholders and strategic
partners, on the terms of new equity and refinancing transactions
that will significantly strengthen BNED’s long-term financial
position. The proposed transactions, which are subject to
shareholder approval and other closing conditions, will enable the
Company to substantially deleverage its balance sheet, continue to
strategically invest in innovation, and operate from a position of
strength.
Upon close, which is expected in June 2024:
- BNED will receive gross proceeds of $95 million of new equity
capital through a $50 million new equity investment (the “Private
Investment”) led by Immersion and a $45 million fully backstopped
equity rights offering (the “Rights Offering”); the transactions
are expected to infuse approximately $75 million of net cash
proceeds after transaction costs;
- The Company’s existing second lien lenders, affiliates of
Fanatics, Lids, and VitalSource Technologies (“VitalSource”)
(collectively, the “Second Lien Lenders”), will convert
approximately $34 million of outstanding principal and any accrued
and unpaid interest into BNED Common Stock; and
- The Company has received commitments to refinance its existing
asset backed loan facility, pursuant to an agreement with its first
lien holders, providing the Company with access to a $325 million
facility (the “ABL Facility”) maturing in 2028. The refinanced ABL
Facility will meaningfully enhance BNED’s financial flexibility and
reduce its annual interest expense.
“Today’s announcement marks a significant milestone in our
strategic review process and, we believe, represents the best path
forward for our shareholders, employees and the students,
institutions, alumni, fans, and communities we serve,” said Michael
Huseby, Chief Executive Officer, BNED. “BNED is a critical part of
the education ecosystem, and we are confident that this transaction
will allow us to grow our business profitably as we enhance our
market leading offerings and build on the strong momentum of First
Day and our other key programs.”
“With a stronger financial foundation, we will be well
positioned to advance our industry leadership by continuing our
focus on delivering innovative solutions, an unmatched merchandise
assortment, and the best-in-class omnichannel customer experience
for our valued school partners,” said, Jonathan Shar, Executive
Vice President, BNED Retail and President, Barnes and Noble
College.
Rights Offering and Private Investment
Through the Rights Offering, BNED plans to issue up to
900,000,000 shares of its Common Stock at a cash subscription price
(the “Subscription Price”) of $0.05 per share. In the Rights
Offering, BNED will distribute to each holder of its Common Stock
on the record date one non-transferable Right, for every share of
Common Stock owned by such holder on the record date, and each
Subscription Right will entitle the holder to purchase the number
of shares of Common Stock determined by dividing 900,000,000 by the
total number of shares of Common Stock outstanding on the record
date. Each holder that fully exercises their Subscription Rights
will be entitled to Over-Subscription Rights to subscribe for
additional shares of Common Stock that remain unsubscribed as a
result of any unexercised Subscription Rights, which allows such
holder to subscribe for additional shares of Common Stock up to the
number of shares purchased under such holder’s basic Subscription
Right at $0.05 per share. Pursuant to the terms and conditions of
the Purchase Agreement, if any Subscription Rights remain
unexercised upon the expiration of the Rights Offering after
accounting for all Over-Subscription Rights exercised, the standby
purchasers will collectively purchase, at the Subscription Price,
up to $45 million in shares of Common Stock not subscribed for by
the Company’s stockholders (the “Backstop Commitment”).
Upon closing of the Rights Offering and in addition to the
Backstop Commitment, investors led by Immersion, have agreed
through the Private Investment to purchase an aggregate of $50
million in shares of the Company’s Common Stock, at the
Subscription Price, in a private placement exempt from the
registration requirements under the Securities Act of 1933, as
amended. The Company intends to use approximately $20 million of
the proceeds from the Rights Offering and Private Investment to
fund transaction-related costs.
Debt Conversion
The Company maintains the strong support of its Second Lien
Lenders, who will convert all outstanding principal and any accrued
and unpaid interest, totaling approximately $34 million under the
Term Credit Agreement (the “Debt Amount”) into a number of new
shares of Common Stock equal to the quotient of the Debt Amount
divided by the Subscription Price (the “Debt Conversion”).
New ABL Credit Facility
In conjunction with the close of the Rights Offering and Private
Investment, BNED has received commitments to refinance its existing
ABL Facility pursuant to an agreement with its first lien holders.
The new $325 million ABL Facility will mature in June 2028 and will
eliminate or modify the existing debt covenants to provide greater
financial and operating flexibility.
The ABL Facility will initially have an applicable margin with
respect to the interest rate of 3.50% per annum, in the case of
interest accruing based on a Secured Overnight Financing Rate, and
2.5%, in the case of interest accruing based on an alternative base
rate. Following the one-year anniversary, the applicable margin
shall be reduced one time by 25 basis points per annum if certain
financial metrics are met.
Credit Amendment
On April 16, 2024, BNED also entered into an amendment (the
“12th Amendment”) to its credit agreement to amend certain
financial covenants to provide additional financial flexibility
ahead of the transactions expected closing date in June 2024.
Other Important Information
The issuance and sale of shares of Common Stock pursuant to the
Rights Offering, the Backstop Commitment, the Private Investment
and the Debt Conversion (collectively, the “Transactions”), is
subject to, among other things, the approval of our stockholders at
a special meeting (the “Special Meeting”). If the issuance and sale
of our Common Stock pursuant to the Transactions is not approved at
the Special Meeting, then the Rights Offering will be cancelled and
the Transactions will be terminated. The Company will file a
Registration Statement relating to the Rights Offering with the
U.S. Securities and Exchange Commission ("SEC") by April 18, 2024.
The Company reserves the right to cancel or terminate the Rights
Offering at any time. This press release does not constitute an
offer to sell or the solicitation of an offer to buy any
Subscription Rights or any other securities to be issued in the
Rights Offering or any related transactions, nor shall there be any
offer, solicitation or sale of Subscription Rights or any other
securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful.
Additional information regarding the Transactions can be found
in the Form 8-K to be filed with the SEC. Additional information
regarding the Short-Term Stockholder Rights Plan approved by the
Company's Board of Directors is available in a separate press
release filed by the Company on April 16, 2024.
This press release does not and shall not constitute an offer to
sell or the solicitation of an offer to buy any securities, nor
shall there be any sale of these securities in any state or other
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such state or other jurisdiction. Any offer,
if at all, will be made only by means of a prospectus, including a
prospectus supplement, forming a part of the effective registration
statement.
Advisors
Paul Hastings LLP is serving as legal advisor and Houlihan
Lokey, Inc. and Berkeley Research Group, LLC are serving as
financial advisors to BNED. Pillsbury Winthrop Shaw Pittman LLP is
serving as legal advisor and BTIG LLC is serving as financial
advisor to Immersion Corporation.
About Barnes & Noble Education, Inc.
Barnes & Noble Education, Inc. (NYSE: BNED) is a leading
solutions provider for the education industry, driving
affordability, access and achievement at hundreds of academic
institutions nationwide and ensuring millions of students are
equipped for success in the classroom and beyond. Through its
family of brands, BNED offers campus retail services and academic
solutions, wholesale capabilities and more. BNED is a company
serving all who work to elevate their lives through education,
supporting students, faculty and institutions as they make tomorrow
a better, more inclusive and smarter world. For more information,
visit www.bned.com.
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: the completion,
timing, size and use of proceeds of the Transactions and
refinancing; the approval by our stockholders of the Transactions
at the Special Meeting; the amount of our indebtedness and ability
to comply with covenants applicable to current and /or any future
debt financing; our ability to satisfy future capital and liquidity
requirements; our ability to continue as a going concern; our
ability to access the credit and capital markets at the times and
in the amounts needed and on acceptable terms; our ability to
maintain adequate liquidity levels to support ongoing inventory
purchases and related vendor payments in a timely manner; our
ability to attract and retain employees; the pace of equitable
access adoption in the marketplace is slower than anticipated and
our ability to successfully convert the majority of our
institutions to our BNC First Day® equitable and inclusive access
course material models or successfully compete with third parties
that provide similar equitable and inclusive access solutions; the
United States Department of Education has recently proposed
regulatory changes that, if adopted as proposed, could impact
equitable and inclusive access models across the higher education
industry; the strategic objectives, successful integration,
anticipated synergies, and/or other expected potential benefits of
various strategic and restructuring initiatives, may not be fully
realized or may take longer than expected; dependency on strategic
service provider relationships, such as with VitalSource
Technologies, Inc. and the Fanatics Retail Group Fulfillment, LLC,
Inc. (“Fanatics”) and Fanatics Lids College, Inc. D/B/A "Lids"
(“Lids”), and the potential for adverse operational and financial
changes to these strategic service provider relationships, may
adversely impact our business; non-renewal of managed bookstore,
physical and/or online store contracts and higher-than-anticipated
store closings; decisions by colleges and universities to outsource
their physical and/or online bookstore operations or change the
operation of their bookstores; general competitive conditions,
including actions our competitors and content providers may take to
grow their businesses; the risk of changes in price or in formats
of course materials by publishers, which could negatively impact
revenues and margin; changes to purchase or rental terms, payment
terms, return policies, the discount or margin on products or other
terms with our suppliers; product shortages, including decreases in
the used textbook inventory supply associated with the
implementation of publishers’ digital offerings and direct to
student textbook consignment rental programs; work stoppages or
increases in labor costs; possible increases in shipping rates or
interruptions in shipping services; a decline in college enrollment
or decreased funding available for students; decreased consumer
demand for our products, low growth or declining sales; the general
economic environment and consumer spending patterns; trends and
challenges to our business and in the locations in which we have
stores; risks associated with operation or performance of MBS
Textbook Exchange, LLC’s point-of-sales systems that are sold to
college bookstore customers; technological changes, including the
adoption of artificial intelligence technologies for educational
content; risks associated with counterfeit and piracy of digital
and print materials; risks associated with the potential loss of
control over personal information; risks associated with the
potential misappropriation of our intellectual property;
disruptions to our information technology systems, infrastructure,
data, supplier systems, and customer ordering and payment systems
due to computer malware, viruses, hacking and phishing attacks,
resulting in harm to our business and results of operations;
disruption of or interference with third party service providers
and our own proprietary technology; risks associated with the
impact that public health crises, epidemics, and pandemics, such as
the COVID-19 pandemic, have on the overall demand for BNED products
and services, our operations, the operations of our suppliers,
service providers, and campus partners, and the effectiveness of
our response to these risks; lingering impacts that public health
crises may have on the ability of our suppliers to manufacture or
source products, particularly from outside of the United States;
changes in applicable domestic and international laws, rules or
regulations, including, without limitation, U.S. tax reform,
changes in tax rates, laws and regulations, as well as related
guidance; changes in and enactment of applicable laws, rules or
regulations or changes in enforcement practices including, without
limitation, with regard to consumer data privacy rights, which may
restrict or prohibit our use of consumer personal information for
texts, emails, interest based online advertising, or similar
marketing and sales activities; adverse results from litigation,
governmental investigations, tax-related proceedings, or audits;
changes in accounting standards; 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 fiscal year
ended April 29, 2023. 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.
Additional Information Regarding the Special Meeting and
Where to Find It
The Company intends to file a proxy statement and proxy card
with the SEC in connection with its solicitation of proxies for the
Special Meeting. THE COMPANY’S STOCKHOLDERS ARE STRONGLY ENCOURAGED
TO READ THE DEFINITIVE PROXY STATEMENT (AND ANY AMENDMENTS AND
SUPPLEMENTS THERETO) AND ACCOMPANYING PROXY CARD WHEN THEY BECOME
AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders
may obtain the proxy statement, any amendments or supplements to
the proxy statement and other documents as and when filed by the
Company with the SEC without charge from the SEC’s website at
www.sec.gov.
Certain Information Regarding Participants
The Company, its directors and certain of its executive officers
and employees may be deemed participants in connection with the
solicitation of proxies from the Company’s stockholders in
connection with the matters to be considered at the Special
Meeting. Information regarding the direct and indirect interests,
by security holdings or otherwise, of the Company’s directors and
executive officers in the Company is included in the Company’s
Proxy Statement on Schedule 14A for its 2023 annual meeting of
stockholders under the heading “Security Ownership of Certain
Beneficial Owners and Management” filed with the SEC on August 25,
2023, which can be found through the SEC’s website at
https://www.sec.gov/ix?doc=/Archives/edgar/data/0001634117/000114036123041294/ny20009569x1_def14a.htm.
Changes to the direct or indirect interests of BNED’s directors and
executive officers are set forth in SEC filings on Initial
Statements of Beneficial Ownership on Form 3 (filed with the SEC on
September 21, 2023, September 21, 2023 and September 21, 2023,
respectively) and Statements of Change in Ownership on Form 4
(filed with the SEC on September 26, 2023, September 26, 2023,
September 26, 2023, September 26, 2023, November 21, 2023 and
December 18, 2023, respectively), which can be found through the
hyperlinks or the SEC’s website at www.sec.gov. Additional
information is available in the Company’s Annual Report on Form
10-K for the year ended April 29, 2023, filed with the SEC on July
31, 2023, available at
https://www.sec.gov/ix?doc=/Archives/edgar/data/1634117/000163411723000032/bned-20230429.htm,
and the Company’s Current Reports on Form 8-K, filed with the SEC
on May 1, 2023, August 11, 2023, September 6, 2023, September 14,
2023, October 5, 2023 and February 6, 2024, which can also be found
through the SEC’s website at www.sec.gov. More detailed and updated
information regarding the identity of these potential participants
and their direct or indirect interests of the Company, by security
holdings or otherwise, will be set forth in the proxy statement for
the Special Meeting and other materials to be filed with the SEC.
These documents, when filed, can be obtained free of charge from
the sources indicated above.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240416812445/en/
BNED Contact – Media and Investors
Hunter Blankenbaker Vice President – Corporate Communications
and Investor Relations (908) 991-2776 hblankenbaker@bned.com
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