Barnes & Noble Inc. is nearing a deal to be bought by hedge fund Elliott Management Corp., according to people familiar with the matter, as the nation’s largest bookstore chain seeks a new owner after years of decline.

Elliott is the lead bidder in an auction that could come to a head soon, the people said. It is expected to pay $6.50 a share, one of the people said.

The stock closed at $5.96, up 30%, on Thursday after The Wall Street Journal reported that a deal with Elliott could be imminent. Barnes & Noble had a market value of $436 million as of Thursday’s close.

The talks with Elliott could still fall apart, and another bidder could emerge victorious. There also might be no deal at all.

The acquisition wouldn’t be the first foray into bookstores for Elliott, which bought U.K. book chain Waterstones last year. Should Elliott prevail, the $35 billion New York hedge fund is likely to maintain Barnes & Noble and Waterstones as two separate companies with Waterstones Chief Executive James Daunt leading both, some of the people said. Mr. Daunt declined to comment.

The auction got under way in October after Barnes & Noble said multiple parties had expressed interest in an acquisition.


Potential buyers have included Leonard Riggio, the retailer’s 78-year-old executive chairman, who owns 19.2% of the company, and Readerlink LLC, a big distributor of books to non-book retailers such as Target Corp. and Walmart Inc.

Barnes & Noble has suffered significant management turnover in recent years while struggling to compete with Amazon.com Inc. and the resurgence of independent bookstores that have proved adept at catering to local tastes with curated offerings.

The company, with 627 stores nationwide, remains a critical partner to publishers, who depend on it to help promote and showcase established writers as well as up-and-coming authors. The issue of discovery—how consumers find writers they were otherwise unfamiliar with—is one of the biggest challenges currently facing the publishing industry.

Barnes & Noble shares have traded at record lows recently as investors lose confidence in the company’s ability to execute a successful turnaround. Its market capitalization is well below the roughly $3 billion the company was worth before the financial crisis.


For the fiscal year ended April 28, 2018, Barnes & Noble swung to a loss of $125.5 million, or $1.73 a share, compared with a year-earlier profit of $22 million, or 30 cents a share. Revenue fell 6% to $3.7 billion while comparable-store sales were down 5.4%.

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As of January, the retailer had $129.3 million in long-term debt.

It fired Demos Parneros, its most recent chief executive, in July 2018, without severance. It later alleged in a legal filing that Mr. Parneros harassed a female employee, bullied other staffers, and undercut the potential sale of the business earlier in 2018.

Mr. Parneros is suing Barnes & Noble for having been fired “without warning or justification.” He has denied all wrongdoing.


The Journal subsequently identified the potential buyer as WH Smith PLC, a U.K.-based retailer of books and other products.

Elliott, best known recently for its shareholder-activist campaigns, is increasingly pushing into private-equity investments and in 2017 hired Paul Best to head its European private-equity arm. Mr. Best led the purchase of Waterstones, which Elliott bought in a deal worth roughly $279 million.

Under Mr. Daunt, Waterstones rebounded from a period of losses and—unlike many other retailers—has been opening new stores, which it fashions to feel like independent shops.

It now has roughly 290 locations, mainly in the U.K. and Ireland, and revenue in its most recent fiscal year was about £400 million ($508 million).


Write to Cara Lombardo at cara.lombardo@wsj.com and Jeffrey A. Trachtenberg at jeffrey.trachtenberg@wsj.com