Liberty Media will pay $204m for a 16.6 per cent stake in Barnes & Noble, the world’s largest bookseller, in a move that comes three months after Liberty tried to acquire a majority position in the company.
In May, Liberty made a surprise bid for Barnes & Noble, offering to pay about $500m for roughly 70 per cent of the troubled bookstore chain. Talk of a majority position has ended with the investment, the companies said. Liberty Media is better known for its online and television properties, which include the QVC shopping network and Starz.
Barnes & Noble will issue approximately 12m new preferred shares to Liberty that will pay a quarterly dividend of 7.75 per cent per annum. Liberty will be able to convert its new shares into common stock at a price of $17 per share. It will have up to 10 years to complete the conversion, and Barnes & Noble can force the conversion after five years.
Barnes & Noble is the last national bookstore chain in the US, following the recent liquidation of Borders. It lost $59m in the most recent quarter as same-store sales fell 3 per cent and it invested heavily in its Nook e-book platform.
The Liberty investment gives the bookseller a welcome cash infusion. “We could not have found a better strategic investor than Liberty Media,” said Leonard Riggio, chairman of Barnes & Noble. “Their investment is a strong endorsement of our overall business and the additional capital will further fuel the explosive growth of our digital strategy.”
Analysts said Barnes & Noble’s most attractive asset was the Nook, which has emerged as a viable alternative to Amazon’s Kindle e-reader. Yet, it still operates more than 700 bookstores, which were hurt in the most recent quarter by Borders’ liquidation sales.
Sales through Barnes & Noble’s website grew at the fastest rate in a decade during the last quarter, spurred on by robust sales of e-books.
“This investment provides Barnes & Noble with capital to grow its business on terms that are attractive for both parties and allows us to play a meaningful role in shaping their success to generate returns for our shareholders and theirs,” said Greg Maffei, Liberty Media chief executive.
Liberty will be allowed to elect two members to Barnes & Noble’s board, and has selected Mr Maffei, and Mark Carleton, senior vice-president of Liberty.
Shares in Barnes & Noble fell 7 per cent on Thursday, but were up in after-hours trading. Since February the stock has fallen more than 35 per cent.
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