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To: Glenn D. Rudolph who wrote (24916)	11/7/1998 2:02:00 PM
From: Bill Harmond	Read Replies (3) \| Respond to of 164684

Cash or credit.

To: Glenn D. Rudolph who wrote (24916)	11/7/1998 4:31:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Price: $30 7/8 12 Month Price Objective: $41 Estimates (Jan) 1997A 1998E 1999E EPS: $0.93 $0.99 $1.50 P/E: 33.2x 31.2x 20.6x EPS Change (YoY): 6.5% 51.5% Consensus EPS: $0.95 NA (First Call: 03-Nov-1998) Q3 EPS (Oct): $0.00 $0.00 Cash Flow/Share: $1.89 $2.24 $2.73 Price/Cash Flow: 16.3x 13.8x 11.3x Dividend Rate: Nil Nil Nil Dividend Yield: Nil Nil Nil Opinion & Financial Data Investment Opinion: C-1-1-9 Mkt. Value / Shares Outstanding (mn): $2,099.5 / 68 Book Value/Share (Jan-1998): $7.61 Price/Book Ratio: 4.1x ROE 1998E Average: 12.6% LT Liability % of Capital: 32.7% Est. 5 Year EPS Growth: 24.7% Stock Data 52-Week Range: $48-$22 3/16 Symbol / Exchange: BKS / NYSE Options: AMEX Institutional Ownership-Spectrum: 51.1% Brokers Covering (First Call): 12 ML Industry Weightings & Ratings Strategy; Weighting Rel. to Mkt.: Income: Underweight (07-Mar-1995) Growth: Overweight (07-Mar-1995) Income & Growth: Overweight (07-Mar-1995) Capital Appreciation: Overweight (05-Oct-1995) Market Analysis; Technical Rating: Below Average (26-Oct-1998) The views expressed are those of the macro department and do not necessarily coincide with those of the Fundamental analyst. For full investment opinion definitions, see footnotes. Investment Highlights: * Barnes & Noble agreed to acquire the Ingram Book Group, the largest distributor of wholesale books in the country * The purchase price is $600 million, comprised of $200 million cash and $400 million stock * Barnes & Noble can opt to re-finance $200 million in stock through the capital markets prior to May 15, 1999 * Deal scheduled to close on January 5 * Acquisition should be marginally accretive to 1999 EPS * In 1997, Ingram generated $1.4 billion in sales (about $300 million with Barnes & Noble) and $60 million of EBITDA * Strategic acquisition includes 11 distribution centers, which should extend Barnes & Noble's distribution reach to 80% of the U.S. * Additionally, the 11 acquired distribution centers make Barnes & Noble's planned construction of two new DCs unnecessary * The company will discuss this transaction and the Bertelsmann JV during a conference call next week, time and date yet to be determined * This excellent strategic acquisition improves Barnes & Noble's competitive posture against its primary Internet competitor, Amazon.com Bulletin United States Retailing - Other Specialty 6 November 1998 Daniel D. Barry First Vice President Barnes & Noble Inc Acquisition Of Ingram Book Group An Excellent Strategic Move BUY Long Term BUY Reason for Report: Analysis Of Ingram Book Group Acquisition Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department RC#10131073