Barnes & Noble sells to hedge fund Elliott for $475.8 million

(Reuters) - Barnes & Noble Inc said on Friday it would be bought by hedge fund Elliott Management Corp for $475.8 million, marking the end of the once-dominant U.S. book retailer as a public company after years of falling sales.

Shares in the largest U.S. bookstore chain rose 11%, after ending up 30% on Thursday when reports of a potential deal surfaced.

Listed on the New York Stock Exchange since 1993, Barnes & Noble has struggled to grow its business since the arrival of Inc turned the book sales market on its head.

Even the company's recent efforts to pull in a more tech-savvy audience with its Nook e-book reader failed to compete with Amazon's Kindle and other tablets.

Elliot's offer of $6.50 per share, represented a premium of about 42% to Wednesday's close, the day before media reports of a potential transaction first surfaced.

Barnes & Noble has been exploring options for a buyout since at least last October, with multiple parties showing interest including founder-chairman Leonard Riggio.

Riggio acquired the flagship Barnes & Noble trade name in 1970s, nearly a century after Charles Barnes started the business in his Illinois home.

Riggio grew the business, adding several retail stores across the country, but could not sustain the growth in a retail landscape dominated by Amazon.

In 2014, Barnes & Noble closed its New York Fifth Avenue store - once the world's largest bookstore - and has faced declining sales for at least the last three years. As of this January, it ran 627 retail stores.

To help turnaround the company's fortunes, Elliott is bringing in Chief Executive Officer of British bookshop chain Waterstones, James Daunt, to take the helm at Barnes & Noble.

Barnes & Noble said Waterstones, which was bought by Elliott last year, has successfully restored itself to sales growth and sustainable profitability under Daunt.

"Our investment in Barnes & Noble, following our investment last year in Waterstones, demonstrates our conviction that readers continue to value the experience of a great bookstore," Paul Best, Elliott's head of European Private Equity said.

While Daunt will lead both companies, the two booksellers would still operate independently.

Daunt will take up the top job, vacant since July 2018, following the completion of the transaction, expected in the third quarter of 2019.

Barnes & Noble fired former CEO Demos Parneros partly because of allegations that he sexually harassed a female employee and attempted to "sabotage" a potential sale.

Parneros, however, rejected the accusations.

The bookseller is being bought by Elliott Management's affiliate, Elliott Advisors (UK) Ltd.

(Reporting by Uday Sampath and Aishwarya Venugopal in Bengaluru; Editing by Shinjini Ganguli)