Activist hedge fund Sandell Asset Management Corp on Tuesday urged Barnes & Noble Inc (BKS.N) to sell itself, saying the struggling U.S. bookstore chain operator could attract media or internet companies seeking a retail presence.

Sandell, which said it had built up a "meaningful" stake in New York-based Barnes & Noble, said the retailer could fetch a price of at least US$12 per share in a sale that would take the company private.

Barnes & Noble's shares rose as much as 14 per cent to US$8.10. The company had a market value of more than US$580 million at that price.

Sandell, in a letter to Barnes & Noble's board, called the bookseller the "one truly national bookstore chain," and expressed its faith in books as an information medium.

"Physical books, and physical bookstores, are not going away anytime soon," the New York-based hedge fund said, despite e-commerce leader Amazon.com Inc (AMZN.O) attracting shoppers away from brick-and-mortar retailers.

Sandell also said it was "shocked" by Barnes & Noble's under-valuation in the stock market.

Barnes & Noble's shares trade at a 74 per cent discount to their intrinsic value of US$12.37, a number calculated by Thomson Reuters based on analysts' estimates of a company's earnings for the next 12 months.

Sales at Barnes & Noble stores have been sliding for years, hurt mainly by competition from Amazon. The company's stock price has more than halved from a 2015 high of around US$19.

But Barnes & Noble's "robust cash flow" and low debt would make the company highly attractive to private equity buyers, Sandell said.

The bookstore chain may also appeal to companies in the internet and media industry, which, in seeking a retail presence, may view Barnes & Noble as a unique "beachfront property," the hedge fund added.

Barnes & Noble, which operates over 600 bookstores across all U.S. states, declined to comment.

Sandell's holding makes it one of Barnes & Noble's top ten investors, according to the Wall Street Journal, which first reported the activist investor's move. 

Sandell suggested that Barnes & Noble's founder and Chairman Leonard Riggio take the company private in a leveraged deal, similar to his attempt in 2013.