Barnes & Noble to Buy Book Wholesaler

Barnes & Noble Inc., the country’s largest bookseller, said Friday that it agreed to buy Ingram Book Group, the country’s largest book wholesaler, for $600 million in a move that immediately raised antitrust questions, since other retailers would be forced to compete against and be a customer of Barnes & Noble.

The deal, involving $400 million in Barnes & Noble stock and $200 million in cash, puts rivals Amazon.com Inc. and Borders Group Inc. in the awkward position of having a significant supplier, Ingram, owned by their largest competitor.

The acquisition of Ingram Book Group, a unit of privately held Ingram Industries Inc., based in Nashville, would significantly expand Barnes & Noble’s distribution network, enabling overnight delivery to 80% of the New York-based company’s retail stores and online customers, Barnes & Noble said. Currently, Barnes & Noble has one distribution facility, near Princeton, N.J., compared with Ingram’s 11 shipping points.

The deal drew immediate opposition from a leading retail group, which vowed to fight what it called the “blatantly anti-competitive” combination.

“We will use all of our strength and available resources to fight it,” the American Booksellers Assn. said, adding that it had requested Justice Department and Federal Trade Commission investigations of the deal.

Alan Kahn, Barnes & Noble chief operating officer, disagreed with the booksellers group.

“This is not going to limit the distribution of books, this is going to speed up the distribution of books. It is in Ingram’s best interest and our best interest to provide great service to everyone,” Kahn said.

Kahn added that he expected the transaction to be completed after a routine regulatory review and that it would add “slightly” to earnings in the first year.

William Armstrong, an analyst at Fahnestock & Co., said that with Ingram, Barnes & Noble is “also buying a wholesale business. . . . They are now going be a supplier to their competitors. If I were Borders or Amazon, I would cut them out as soon as I could find alternative suppliers.”

While Ingram has market power, it’s unclear how Barnes & Noble might use it. The Justice Department said it will review the deal, implying that it would prohibit any anti-competitive behavior. Also, because Amazon and others are large customers of Ingram, it may not make financial sense to hurt them for fear of losing revenue in the long term.

Ingram Book Group, which generated about $1.4 billion in sales last year, will continue to supply books to current customers, including independent bookstores, specialty retailers and libraries, after the acquisition, Barnes & Noble said.

The second-largest book wholesaler is Baker & Taylor Inc., which an Amazon spokesman referred to as “kind of like being the second-largest wine-producing state.”

“Ingram is the largest book distributor in the United States, and many independent bookstores rely on it as their sole source of supply. That said, the combination of the country’s biggest book retailer with its biggest distributor and, given the recently announced Bertelsmann transaction . . . undoubtedly will raise industrywide concerns,” Amazon said in a statement.

German media giant Bertelsmann, which owns Random House and Doubleday, and Barnes & Noble recently crafted a joint venture to operate Barnesandnoble.com, the company’s online bookseller.

The market reacted with restraint to the deal, pushing Barnes & Noble stock up $3.38, or nearly 11%, to close at $34.25 on the New York Stock Exchange. The stocks of both Amazon and Borders, however, hardly budged and trading in Amazon was lighter than average.