Baker & Taylor Corporation Business Information, Profile, and History

Company Perspectives:

Baker & Taylor is a leading full-line distributor of books, videos, and music products to Internet and traditional retailers and to library customers. We also provide our customers with value-added proprietary data products and customized management and outsourcing services. We have been in business over 170 years and have developed long-term relationships with our customers and with the major book publishers, movie studios, and record labels.

History of Baker & Taylor Corporation

Baker & Taylor Corporation is the leading book supplier to libraries and the No. 2 book supplier in the United States. Baker & Taylor ships more than 1 million ISBNs (titles) each year. The company maintains one of the largest in-stock book, video, and music inventories in the United States, with an estimated 385,000 titles in inventory and more than 1.5 million available for order. The company has three divisions. Its institutional arm distributes books, tapes, calendars, CDs, DVDs, and videos to about 28,000 schools and libraries worldwide. Its retail division supplies approximately 20,000 brick-and-mortar and Internet retailers, including Amazon.com and independent booksellers. The Informata.com unit is Baker & Taylor's business-to-business e-commerce division, which distributes electronic content, licenses database services, and creates Internet portals. The investment firm The Carlyle Group and its affiliates own 85 percent of Baker & Taylor; management, employees, and other private investors own the rest.

19th Century Origins

Baker & Taylor was founded by David Robinson and B.B. Barber in 1828, beginning its corporate life as a small bindery and subscription book publisher in Hartford, Connecticut. A short time later, Robinson and Barber opened a bookstore to distribute their own books and other publishers' books. After establishing a solid position in Hartford, the two businessmen moved their flourishing concern to New York City in 1835. During the ensuing years, the focus of the company's business shifted from publishing its own books toward distributing other publishers' books. The company was relying on the latter to fuel its growth by the time its ownership was passed to the two men whose names would become synonymous with book distribution in the 20th century. In 1885, exactly 50 years after the relocation from Hartford to New York City, James S. Baker and Nelson Taylor purchased the company founded by Robinson and Barber, lending their surnames to a concern that would bear the Baker & Taylor name for more than the next century.

In terms of business focus, James Baker and Nelson Taylor did not alter the direction of the business they acquired from Robinson and Barber until 1912, when they abandoned publishing entirely and instead directed the company toward wholesaling. In the decades ahead, Baker & Taylor would establish itself as a prodigious competitor in its new business, becoming a familiar name to librarians and bookstore owners across the country who purchased books from the venerable wholesaler. In 1958 Baker & Taylor was purchased by Parents Magazine, remaining under its control until W.R. Grace & Co. acquired the company in 1970, beginning a period in the company's history that insiders would later characterize as difficult years.

1970s and 1980s: W.R. Grace & Co. at the Helm

When Baker & Taylor joined the W.R. Grace & Co. fold, it became sibling to a host of other businesses that operated under the expansive corporate umbrella of the diversified conglomerate. W.R. Grace & Co.'s corporate reach was broad, including a wide range of business interests that ran the gamut from Baker & Taylor's book wholesaling business, to the manufacture of oil rigs, to the marketing of bull semen. Positioned within this eclectic array of businesses, Baker & Taylor, to a certain degree, was lost in the mix. The company struggled to assert itself amid its parent company's diverse business interests, but as the years of W.R. Grace & Co.'s ownership wore on, its business began to suffer. Librarians, who had relied on and trusted the Baker & Taylor name for more than a century, began to reassess their opinion of the book wholesaler, and, as a result, the company gradually developed a reputation among its customers for inconsistent service. Changes were needed, but it would be years before Baker & Taylor's management could direct the company as they saw fit and enter into a new era without the influence of W.R. Grace & Co.

Gerald G. Garbacz witnessed the effects of W.R. Grace & Co.'s ownership of Baker & Taylor firsthand, joining the book wholesaler in 1974, four years after its acquisition by the diversified conglomerate. By 1980 Garbacz had risen to the position of president, a post that provided him with a revealing vantage point from which to evaluate the company's operation under W.R. Grace & Co. Garbacz would later say during an interview with Library Journal that W.R. Grace & Co.'s management "placed a great deal of emphasis on short-term financial performance with very little emphasis on the development of markets and human resources," chiding the parent company's approach to sustaining Baker & Taylor's long-term vitality. In spite of the damage done to the book wholesaler's reputation during the 1970s and 1980s, however, there were some positive aspects to W.R. Grace & Co.'s 22-year reign of control. During this time, Baker & Taylor became a more diversified business, gaining, through acquisitions engineered by W.R. Grace & Co., two new facets to its long-established business of wholesaling all types of books: computer software and videocassette distribution arenas. With the addition of these sister businesses, the foundation for the future Baker & Taylor, Inc. was created, engendering the well-rounded information and entertainment concern that existed in the 1990s.

Baker & Taylor Video's roots extended back to 1975 when Chicago-based Sound Unlimited was founded. The company, which lengthened its name in 1979 to Sound Video Unlimited, operated as a regional wholesaler of videocassettes. Before being acquired, the company helped pioneer the distribution of videocassette programming in VHS and BETA formats, along with another videocassette distribution company, VTR Incorporated, which was purchased by W.R. Grace & Co. in 1986. Sound Video Unlimited and VTR were then merged, forming Baker & Taylor Video, the largest full-line videocassette distributor in the United States. The establishment of Baker & Taylor Video in 1986 coincided with the acquisition of SoftKat, a computer software distribution firm founded in 1983 during the early years of the personal computer industry. Personal computers, in subsequent years, would become ubiquitous fixtures in homes and offices, while the demand for videocassettes would burgeon as well, giving Baker & Taylor Books two solid counterparts within W.R. Grace & Co.'s corporate structure.

The years spent under W.R. Grace & Co.'s management strengthened Baker & Taylor's business in other areas, particularly in international markets. Although Baker & Taylor had crossed U.S. borders just before its acquisition by W.R. Grace & Co., operating its distribution activities in foreign countries through offices in Somerville, New Jersey, the company's international business was bolstered considerably while under the ownership of W.R. Grace & Co. Sales offices were opened in Australia and Japan in 1983 and 1986, respectively. Then, following the 1989 acquisition of Feffer & Simons, which operated as an international publishers' representative, Baker & Taylor International, Ltd. was formed, providing Baker & Taylor Books with a corporate conduit to extend its wholesaling services to international markets.

The formal establishment of an international division in 1989, coupled with the acquisition of videocassette and computer software distribution companies, made Baker & Taylor a diversified competitor in the distribution business, certainly more so than when the company was first acquired by W.R. Grace & Co. in 1970. But its diversity also incited the harshest criticism of W.R. Grace & Co.'s management by Baker & Taylor executives. Garbacz cited W.R. Grace & Co.'s central failure as the company's decision to operate the Baker & Taylor businesses as separate entities, reflecting to a Library Journal reporter that "there was a very large element of uncertainty under Grace; they didn't want the various units of B&T working together as closely as [Baker & Taylor management] wanted." This point was reiterated by another Baker & Taylor executive, who told Publishers Weekly, "When we were owned by Grace, all three divisions operated as very separate, very independent companies with little or no interaction."

1992: W.R. Grace & Co. Divestiture

For those disenchanted with the manner in which the Baker & Taylor businesses were managed under the auspices of W.R. Grace & Co., welcome news arrived in November 1991 when the diversified conglomerate announced its intention to sell its Baker & Taylor subsidiaries. Several months after the announcement, in early 1992 ownership of the Baker & Taylor businesses was passed to a group of Baker & Taylor management and The Carlyle Group, a private, Washington, D.C.-based merchant banking and investment firm whose specialty was acquiring businesses from large conglomerates. Like W.R. Grace & Co., The Carlyle Groups's business interests were diverse, including companies involved in real estate, airline catering, chemicals, aerospace, and commercial and military aircraft manufacturing. Unlike W.R. Grace & Co., however, Carlyle's management of the Baker & Taylor businesses met with the approval of Garbacz and his management team, ushering in the beginning of a new era for both Garbacz and Baker & Taylor.

The acquisition of the various Baker & Taylor businesses by Carlyle also engendered the formation of Baker & Taylor, Inc., which was organized in March 1992 as a holding company for Baker & Taylor Books, its distribution divisions, Video and SoftKat, and Baker & Taylor International, Ltd. Leading the newly formed Baker & Taylor, Inc. during its first year of business was Gerald G. Garbacz, who was named chairman and chief executive officer of the company, in addition to his duties as the top executive of Baker & Taylor Books. Under Garbacz's stewardship, the Baker & Taylor units were governed in a decidedly more concerted manner than during the W.R. Grace & Co. years. The company's corporate culture was revamped and its focus was altered, transforming Baker & Taylor into an information and entertainment services firm rather than a company purely focused on distribution. As part of these changes, Baker & Taylor's software division, SoftKat, underwent a name change in 1992, becoming Baker & Taylor Software. The following year, Baker & Taylor Software, which dealt in educational and entertainment computer software, was combined with Baker & Taylor Video, a supplier of videocassettes and music recordings in both cassette and compact disc formats, to form Baker & Taylor Entertainment.

When Baker & Taylor employees reported for work on May 16, 1994, they heard surprising news. Chicago-based Follett Corp., a distributor of books, textbooks, and computer software to the school library market, had announced its intention to acquire The Carlyle Group's 92 percent stake in Baker & Taylor, Inc., setting the stage for another new era in the company's history. With three divisions that operated in business areas similar to those of Baker & Taylor and another three divisions involved in markets not served by Baker & Taylor, Follett struck industry pundits as a good match for the units composing Baker & Taylor, Inc. This acquisition would combine the $800 million in annual sales generated by Baker & Taylor, Inc. with Follett's $650 million in annual sales. Negotiations between family-owned Follett and The Carlyle Group were conducted throughout the rest of May, continuing into June, but were called off in the middle of the month after several weeks of discussions failed to yield a final agreement between the two companies.

In the wake of the aborted sale, The Carlyle Group announced that it would return to supporting Baker & Taylor's long-term strategy of upgrading its systems and achieving greater efficiencies through the consolidation of the company's operations, but the majority owner of the book, entertainment, and software distributor did make one important change. Slightly more than a week after the Follett deal fell through, The Carlyle Group executives ordered sweeping changes in Baker & Taylor's top management, replacing Garbacz, who officially resigned as chairman and chief executive officer of the company, with three individuals, Patrick Gross, Joseph Wright, and Craig Richards. With Garbacz gone, it was up to Gross and Wright, who jointly served as the company's chairman, and Richards, who was named chief executive officer, to lead Baker & Taylor through its new era, as the venerable company moved toward its third century of business.

Turn of the Millennium: The Internet Age

Baker & Taylor profited from its early relationship with Amazon.com, in which it provided books and a broad database of available books to the Internet retailer. In 1996 as online bookselling was becoming more widespread, Baker & Taylor and its main competitor, Ingram Book Co., a unit of Ingram Industries, were creating computer programs that would allow booksellers to link their Web sites to the distributors' extensive database of books. The distributors' programs would become available to booksellers the following year.

In November 1998 an announcement came that rocked the book business: Barnes & Noble was planning to buy the biggest book distributor, Ingram Book Group of Nashville, for $600 million. Barnes & Noble's bid for Ingram would give the retailer access to a broad, nationwide distribution system that could boost the retailer's disappointing Internet operation. The American Booksellers Association, which represented 3,400 independent booksellers, opposed the merger. The January 4, 1999 issue of Mergers & Acquisitions Report predicted that Amazon.com and Borders would bid for privately held Baker & Taylor—the only large competitor to the Ingram Book Group. But in June 1999 Barnes & Noble called off the takeover.

Meanwhile, Baker & Taylor's business grew by 20 percent to about $1 billion in 1998. In May 1999 B&T revealed the most aggressive expansion in its 171-year history, including plans to enlarge service centers in Georgia, Illinois, Nevada, and New Jersey by more than 650,000 square feet. These plans reportedly were in place before the Barnes & Noble/Ingram merger agreement had been announced. Also in 1999, the trend of on-demand publishing gained traction in the industry, thanks to faster and cheaper technology. Baker & Taylor's Replica Books, the on-demand division of Baker & Taylor Books, gathered other publishers' backlists and bought rights to out-of-print titles, instead of seeking unpublished works for its on-demand projects. Replica Books works with authors and publishers to keep books in print, prolonging the life of a book. Today, each title is kept in an electronic database, and the books are printed on a high-speed printer and bound in hardcover or paperback.

With the "Internet Revolution" at full speed, in April 1999, Baker & Taylor entered a relationship with VarsityBooks.com, an upstart company that would sell college textbooks over the Internet. CEO Eric J. Kuhn had cold-called James Ulsamer, president of the retail division of Baker & Taylor. Having succeeded with horizon-expanding Amazon.com, Ulsamer decided to take a chance on VarsityBooks, and Baker & Taylor agreed to warehouse the books, process orders, and ship books for the Internet retailer. The relationship with Baker & Taylor gave the newcomer credibility. But like many dot-com disappointments, VarsityBooks was unable to sustain its stock value, and in January 2001 the company was delisted from the NASDAQ.

Baker & Taylor had attempted to go public in late 1999, but a public offering was never completed, which the company attributed to soft market conditions. In the summer of 2000, to focus on business-to-business opportunities in the Internet-driven market, Baker & Taylor launched a new e-commerce business, Informata.com. The division would concentrate on electronic content, database operations, and the creation of Internet portals to host fulfillment services for vendors. Its first portal, TheLibraryPlace.com, sold a variety of products for librarians, including books, music, movies, furniture, and equipment. In the fall of 2000 the American Booksellers Association launched Booksense.com, the e-commerce wing of the organization's family of independent-bookseller Web sites, using Baker & Taylor's Title Source Database, which at the time contained 2.2. million books.

In August 2000 Baker & Taylor and its former parent company, W.R. Grace & Co. reached a settlement with the Department of Justice, which had filed suit against the library supplier for overcharging school districts, libraries, and the government. The suit alleged that as early as 1980, Baker & Taylor's trade books, intended for a general readership, were wrongly classified as non-trade titles to institutions. As a result, the libraries received smaller discounts, while full-trade discounts on the same books were given to retailers. The two companies paid a total of $15.5 million to 18 states in the lawsuit, with proceeds going to state library systems. Baker & Taylor and W.R. Grace Co. denied the claims.

In January 2001 Craig Richards, CEO of both Baker & Taylor and Informata, left the company. The January 22, 2001, issue of Publishers Weekly speculated that Richards' departure was associated with his inability to find a buyer for Baker & Taylor at a price palatable to the wholesaler's parent holding company, The Carlyle Group. Gary Rautenstrauch, Baker & Taylor's chief operating officer, succeeded Craig Richards as president. In June 2001, continuing to build its retail division, the company entered an agreement with Alibris.com, the used, rare, and out-of-print online bookstore, whereby the retailer would list its titles online with Baker & Taylor's Title Source II. The deal allows librarians looking for out-of-print, out-of-stock, or rare books to link directly from the wholesaler's bibliographic records to listings on the Alibris Web site, where orders can be fulfilled. Around this time, Baker & Taylor joined with Gaylord Information Systems to provide improved electronic data interchange (EDI) ordering in Polaris, GIS's library automation system. The new interface allows Polaris customers to do online collection development, ordering, and acquisitions through Baker & Taylor.

Principal Subsidiaries:Baker & Taylor, Inc.; Professional Media Services Corp.; YBP Library Services.

Principal Competitors:Ingram Book Co.

Chronology

• Key Dates:
• 1828: Baker & Taylor is founded as a small bindery and subscription book publisher in Hartford, Connecticut.
• 1835: David Robinson and B.B. Barber move the firm to New York City.
• 1885: James S. Baker and Nelson Taylor purchase the company.
• 1912: The company discontinues publishing to concentrate on wholesaling.
• 1958: Parents Magazine acquires the company.
• 1970: W.R. Grace & Co. purchases Baker & Taylor.
• 1986: Baker & Taylor Video, the largest full-line videocassette distributor in the U.S. is formed.
• 1989: Baker & Taylor International, Ltd. is created to extend wholesaling services internationally.
• 1991: Ownership is passed on to a set of Baker & Taylor managers and affiliates of The Carlyle Group.
• 1993: Baker & Taylor Entertainment is established as a supplier of videocassettes and music recordings in cassettes and CDs.
• 1999: The company creates on-demand publishing division Replica Books.
• 2000: Baker & Taylor launches an e-commerce division Informata.com; and the company settles with the Department of Justice a lawsuit alleging Baker & Taylor of overcharging school districts, libraries, and the government.