Add another log to the LBO rumor fire, because the New York Times's DealBook reports that Barnes & Noble, Inc. (NYSE:BKS) is a ripe candidate to be taken private. Credit Suisse analyst Gary Balter has raised his rating to "outperform" from "underperform," citing the book retailer as "one of the best positioned LBO-type candidates in our universe."
He thinks B&N's shares look pretty cheap, based on the company's consistent cash flow, and promising near-term rate of return.
Word has also surfaced that B&N rival Borders Group, Inc. (NYSE:BGP) could also be headed for an LBO, even though it's less likely. Balter has lowered his rating on BGP to "neutral" from "outperform," presumably due to valuation; the stock's had a nice 33% upside since July.
Buyout speculation has been swirling ever since Pershing Square Capital took positions in both booksmiths. Balter thinks, however, that even though Borders could rebound from its disappointing earnings news last month, B&N has a "better risk/reward level."
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