By DOREEN CARVAJAL
n another shift in the landscape of the book industry, Barnes & Noble, the nation's largest bookseller,
announced the $600 million purchase on Friday of the leading wholesaler, Ingram Book Group.
An organization of independent booksellers immediately denounced the deal as "devastating," and an
authors group compared it to a wedding of Godzilla and King Kong.
Pressing to expand its distribution network, Barnes & Noble agreed to acquire the privately held
subsidiary of Ingram Industries for $200 million in cash and $400 million in stock. The acquisition will
give the company access to 11 distribution centers, which will help it cut costs and reduce delivery time
for its growing base of on-line customers,
"I couldn't possibly spell out all of the many benefits and synergies we will realize as a result of this
transaction," Leonard Riggio, the chairman of Barnes & Noble, said in a statement announcing the
agreement, which was struck after several weeks of negotiations.
Barnes & Noble stock gained 11 percent Friday, rising $3.375 a share, to $34.25, on the New York Stock
Exchange.
The announcement comes amid a flurry of moves by the New York-based bookstore giant, which recently
formed an alliance with the media conglomerate Bertelsmann A.G.
to run its on-line bookstore as a joint venture and earlier this week named Jonathan Bulkeley as chief
executive of the venture.
Barnes & Noble has been struggling to increase its share in the growing on-line market, where the
pioneering Amazon.com is the clear leader.
For independent booksellers, the worst fears are that a new book conglomerate mixing Ingram and
Barnes & Noble could ultimately affect such issues as their credit, speed of delivery or access to popular
titles in short supply.
Although Ingram, which is based in Nashville, is a dominant force in book distribution, it does not
disclose its market share. Barnes & Noble has 14 percent of the market, the company said.
Amazon.com, which got its start by relying on wholesalers to fill its orders, is also dependent on the
services of Ingram. In fact, Ingram has been its leading supplier, filling more than 58 percent of its
orders, according to Amazon.com.
Some of these issues will fall under the scrutiny of Federal regulators, which must review the purchase
for any antitrust violations. That analysis of the deal's effect on competition will include an examination
of such elements as prices, delivery and special deals.
David Brodwin, an associate partner at Andersen Consulting, a management and technology consulting
firm, said the bookstore chain was obviously trying to become a more competitive force in electronic
commerce so that customers get their deliveries faster and cheaper.
"As E-commerce takes hold, it puts severe pressure on the distribution to be more efficient," he said.
"This isn't a completely new thing. This is a continuation of all the price competition that's hit book
retailing. Electronic retailing makes it much more severe than ever before, so that by pulling together
entities like this it's possible to get much lower operating costs."
Mr. Brodwin said the acquisition probably posed great hazards for independent booksellers, who had
subscribed to the unwritten rule that "people in the distribution channel don't compete with their
customers, their retailers."
"Of course, when there's a merger like this, it makes the retailers feel threatened," he said. "They feel
they might not get the best pricing or they might not get the most current availability of a book when they
want a hot title."
The American Booksellers Association, the trade organization for independents, said it had already
prepared letters for the Justice Department and the Federal Trade Commission demanding an
investigation of the purchase. Barnes & Noble said it would apply on Monday for the review of Federal
regulators.
In a statement, the booksellers group called the deal a "devastating development that threatens the viability
of competition in the book industry." Asked if the organization was considering forming a distribution
cooperative of its own, the chief executive, Avin Mark Domnitz, said it was examining all options,
including new "alliances and strategic partnerships."
Many of the smaller bookstores rely primarily on Ingram as the sole source for book orders, he said,
although the larger stores typically place orders directly through publishers, Ingram and the
second-largest wholesaler, Baker & Taylor.
The New York Times Company has a marketing partnership with Barnes & Noble that allows readers of
the newspaper's World Wide Web site to order books directly from the bookseller. The Times receives a
transaction fee.
Amazon.com, which is based in Seattle, issued a statement Friday stressing that it purchases books from a
variety of sources, including Ingram, and will continue to increase its direct purchasing from publishers.
But the company also raised concerns about the combination of the country's biggest book retailer with its
biggest distributor, expressing the hope that Ingram would show "a strong commitment to treating all
bookstores fairly."
"To our customers: Worry not," the founder of Amazon.com, Jeffrey P. Bezos, said in the statement.
"Those who make choices that are genuinely good for customers, authors and publishers will prevail.
Goliath is always in range of a good slingshot."
The New York-based Authors Guild also expressed qualms about the effect of the purchase on the
shrinking base of independent bookstores. "If I were an independent bookseller, I would be scared to
death by this," said Paul Aiken, the executive director of the guild.
"The Godzilla of publishing is wedding the King Kong of distribution. These are the two huge players in
the field, and from an author's concern, the independent bookstores have been our strongest allies for the
barely known author."
Stephen Riggio, the vice chairman of Barnes & Noble, who is a brother of Leonard Riggio, said Friday
that the bookstore chain would be treated no differently from any other Ingram customer.
"We are going to continue service to all of Ingram's customers," he said. "We will continue to provide
them with the same level of outstanding service. They're obviously free to buy from whomever they
choose, but as I said, we not only intend to deliver the same level of service but to increase it."
He also said he expected the deal to close within 35 to 45 days. |
