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Yesterday the NYPost reported that talks for Liberty Media to buy Barnes & Noble had hit a snag. Conversely the Journal reported that Liberty was moving from due diligence toward making a final offer.Ongoing uncertainty since the deal was announced in May suggest major obstacles to a deal, according to Barclays’s analyst Alan Rifkin:
“In our view, this continued uncertainty supports our belief that significant challenges remain in completing a deal and that Barnes & Noble is unlikely to be successfully acquired. We believe investors should focus their attention on the company’s fundamentals, which are being negatively impacted by an increasingly competitive E-commerce environment coupled with a push toward lower margin E-readers. We believe that in the event a deal with Liberty Media is not reached, Barnes & Noble shares could potentially revert to a fundamental value of $14 per share, implying a multiple of 0.1x our 2012 sales estimate.”
Meanwhile those fundamentals are deteriorating. The bookstore is losing money on its online services and faces tough competition on its E-reader — and those were two of the advantages it held over recently bankrupt Borders. Of course the primary business model, big box book sales, is even more vulnerable.
Barclays reiterated an underweight rating this morning.