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Barnes & Noble buys Ingram
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November 6, 1998: 1:58 p.m. ET
Bookstore giant takes on Amazon.com, pays $600M for wholesale distributor
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NEW YORK (CNNfn) - Barnes & Noble Inc., the retail book superstore operator, agreed Friday to buy Ingram Book Group, a leading wholesale distributor, for $600 million.
Under terms of the deal, Barnes & Noble will purchase Ingram Book Group, a privately held subsidiary of Ingram Industries Inc., for $200 million cash and $400 million in stock.
The acquisition, which teams the nation's largest bookseller and the largest distributor, is expected to help Barnes & Noble improve distribution efficiency and lower costs.
It also, however, adds an interesting twist to the fast growing business of online book selling.
Ingram is the largest supplier of books to Amazon.com, the electronic commerce giant that cornered the cyberspace bookselling market and bills itself as "Earth's biggest bookstore."
Barnes & Noble, which is making moves to compete aggressively online, is forecasting Web-based sales of $75 million this year. That, however, is well below the $153.7 million revenue Amazon reported in its third-quarter alone.
Analysts say they believe Ingram's relationship with Amazon.com weighed heavily on Barnes & Noble's decision to buy Ingram.
"I think Barnes & Noble really likes to hurt Amazon.com," said Bankers Trust New York analyst Christopher E. Vroom.
He added the acquisition of Ingram gives Barnes & Noble an advantage in the distribution arena, "which we believe is critically important to the long-term success of online or real (bookselling) world."
With the $600 million it paid, however, Vroom said Barnes & Noble could have built about 40 of its own distribution facilities. But, then, it would not have gained Ingram's industry-leading know-how.
"They paid a great deal for these assets," he said. "We were surprised that Amazon.com didn't buy them. It remains to be seen what long-term benefits (Barnes & Noble) will realize. But certainly, $600 million is a lot of money."
Moreover, Vroom said the buyout could shake the stability of Ingram's client base, many of which are independent bookstores that detest the competition and low prices that Barnes & Noble superstores bring into their neighborhoods.
"Some will undoubtedly find an alternate distribution channel," he said.
But Smith Barney analyst Maureen McGrath, disagrees that Barnes & Noble coughed up a "great deal" for Ingram.
According to her, it's a testament to the company's commitment to building its online business.
"This is really an investment in their Internet business," she said. "It brings to Barnes & Noble immediately a nationwide distribution network. This is really key for their Internet business. It puts them at a competitive advantage to Amazon.com, with respect to their distribution capabilities."
Amazon.com (AMZN) shares were trading down 3-1/16 at 125-7/16 on the Nasdaq Friday afternoon.
Ingram Book Group is a major wholesaler of trade books, spoken audio, textbooks and specialty magazines in the U.S. It has 11 distribution centers nationwide.
The group includes Ingram Book Co., a leading wholesaler of general trade books; Retailer Services, Inc.; Ingram Periodicals, Inc.; Spring Arbor Distributors, Inc.; Publisher Resources, Inc.; Ingram International, Inc.; Tennessee Book Co.; Lightning Print, Inc.; and Ingram Library Services, Inc.
Barnes & Noble, Inc. operates 504 Barnes & Noble bookstores and 507 B. Dalton bookstores.
Shares of the company (BKS) shot up 2-13/16, or more than 9 percent, to 33-11/16 Friday afternoon on the New York Stock Exchange. 
-- by Shelly K. Schwartz
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