October 6, 1999
BARNES & NOBLE, INC. ANNOUNCES PLANS TO BUY BABBAGE'S ETC., A MARKET LEADER
IN ONE OF THE FASTEST-GROWING RETAIL SEGMENTS, FOR $215 MILLION
495 STORES IN 47 STATES AND PUERTO RICO
New York (October 6, 1999) - Barnes & Noble, Inc. ("Barnes & Noble") today
announced an agreement to acquire Babbage's Etc. LLC ("Babbage's Etc."),
one of the nation's largest operators of video game and entertainment
software stores, with 495 stores under the Babbage's(R), Software Etc.(TM),
and GameStop(R) names. Babbage's Etc. also recently launched a web site,
gamestop.com, to sell video games and personal computer software online.
The purchase price of $215 million consists of $189 million in cash, and
the assumption of $26 million in certain liabilities. If financial
performance targets are met over the next two fiscal years, Barnes & Noble,
Inc. will make contingency payments of $10 million in the year 2001 and $10
million in 2002.
The company believes it has purchased Babbage's Etc. at a significant
discount to the market value of similar companies. This purchase price
represents a multiple of 6.0 times Babbage's Etc.'s earnings before
interest, taxes, depreciation, and amortization ("EBITDA") for the twelve
months ended July 31, 1999 and 5.1 times projected EBITDA of $42 million
for the year ending January 29, 2000. When using the 10.8 times multiple of
its nearest competitor, Babbage's Etc. would be valued today at $385
million. Using the same 10.8 multiple and based on estimated 1999 EBITDA,
Babbage's Etc. would be valued at $454 million. Based upon the purchase
price and projected results of Babbage's Etc., this acquisition is expected
to be accretive to Barnes & Noble, Inc.'s earnings by $0.10 per diluted
share for fourth quarter 1999 results.
Barnes & Noble has previously announced its intention to invest its free
cash flow in complementary, high-growth businesses. Consistent with that
goal, this acquisition enhances the company's top and bottom line growth
potential and its position as the leading retailer of books, music, video
and related information and entertainment products.
"This acquisition presents an exciting opportunity for Barnes & Noble.
First, because we believe we can expand this already fast-growing business
at an accelerated pace. Second, we believe that the integration of the
product mix of both companies affords additional opportunities for both
revenue and bottom line growth," said Alan Kahn, chief operating officer of
Barnes & Noble, Inc. "This acquisition is also very important to the
positioning of our on-line affiliate, barnesandnoble.com, where the
penetration of the fast-growing video game market is not only
complementary, but can be considered essential."
According to the NPD Group, a leading provider of global marketing
information on consumer purchasing and behavior, the video game and
personal computer-based entertainment markets are expected to grow from
$8.4 billion in 1998 to $9.4 billion in 1999. Industry sources project
sales to exceed $10 billion in 2000.
The principal owner of Babbage's Etc. LLC is Leonard Riggio, chairman and
chief executive officer of Barnes & Noble, Inc. Accordingly, the Board of
Directors of Barnes & Noble, Inc. established a special committee of
independent directors to consider the feasibility of the acquisition of
Babbage's Etc., to evaluate the fairness of the transaction to Barnes &
Noble, to make a recommendation to the Board based upon its conclusions,
and to review and assist in negotiating the transaction and the purchase
price.
The special committee and the full Board unanimously approved the
transaction. The special committee was advised by independent legal
counsel, Simpson, Thacher & Bartlett and independent financial advisors,
Peter J. Solomon Company Limited. Babbage's Etc. was advised by Robinson
Silverman Pearce Aronsohn & Berman LLP and Merrill Lynch & Co.
The transaction is subject to customary terms and conditions, including
Hart-Scott-Rodino clearance. Barnes & Noble, Inc. expects to finance the
acquisition under its existing $850 million senior credit facility.
About Barnes & Noble
Barnes & Noble, Inc. (NYSE: BKS) operates 521 Barnes & Noble and 448 B.
Dalton bookstores. Barnes & Noble stores stock an authoritative selection
of book titles and provide access to more than one million titles. They
offer books from more than 50,000 publisher imprints with an emphasis on
small, independent publishers and university presses. Barnes & Noble is one
of the world's largest booksellers on the World Wide Web
(http://www.bn.com), and the exclusive bookseller on America Online
(Keyword: bn). barnesandnoble.com has the largest standing inventory of any
online bookseller. Barnes & Noble also publishes books under its own
imprint for exclusive sale through its retail stores, mail-order catalogs,
and Web site.
General financial information on Barnes & Noble, Inc. can be obtained via
the Internet by visiting the company's investor relations Web site:
shareholder.com.
Safe Harbor
This release may contain forward-looking statements regarding expectations
of the company. These statements are based on currently available
information and represent the beliefs of the management of the company. The
future events, which are the subject of such statements, are subject to
certain risks, including those set forth in the company's annual, quarterly
and other reports on file with the Securities and Exchange Commission.
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