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An Activist's Campaign to Have Barnes & Noble Sold Could Escalate Quickly

Barnes & Noble Inc. (BKS) likely has until mid-August to respond to an activist campaign launched Tuesday by insurgent investor Tom Sandell, who is seeking to have the nation's sole national "brick and mortar" book retailer hire an investment bank to sell itself.

Sandell's fund, Sandell Asset Management, has accumulated a less than 5% stake in the bookseller chain and believes the company could attract a bid of greater than $12 a share by a retailer or private equity bidder, a more than 60% premium to its closing price Monday of $7.10 a share.

Shares of the book chain, which has a $494 million market capitalization, jumped up 12% in premarket trading on the news.

The activist fund said in a statement that it is seeking a "constructive dialogue" with the company. However, the retailer, which has 633 locations, probably doesn't have long to respond. Sandell frequently employs director-election proxy contests to drive his efforts and he could do so again at Barnes & Noble. According to FactSet, Sandell has launched 38 activist campaigns including 10 director-election proxy fights and seven threats of proxy fights since forming his fund in 2004.

At Barnes & Noble, shareholders seeking to nominate director candidates must do so by 30 days before the company's annual meeting, which is likely to take place in September or October. As a result, Sandell may be required to nominate directors by mid-August...