Friday, May 20, 2011

Liberty Media makes $1 Billion offer for Barnes & Noble

According to Financial TimesLiberty Media has offered to buy Barnes & Noble, the struggling US bookseller, for $1 billion, in an unexpected deal that would significantly diversify Liberty’s holdings.

Booksellers are struggling to remain solvent as customers buy more books   online, specifically from, and adopt e-books. Amazon said that for the first time, e-books are outselling paperback or hardcover books. B&N has not been able to transform itself into a retail destination. However, its Nook e-reader is selling well. Borders, the second-largest bookseller in the US, filed for bankruptcy in February and has struggled to find a buyer. This means very bad news for traditional book publishers who have not embraced digital channels aggressively.

Barnes & Noble, the largest book retailer in the country, announced the offer, valued at $17 per share, after the market closed on Thursday. It cautioned that the company’s board has not reviewed the proposal and that no deal was assured.

John Malone, the billionaire chairman of Liberty, is known to be an astute deal hunter. His most recent success was Liberty’s purchase of 40 per cent of satellite radio provider Sirius XM for $530m, a stake he bought when the company was near bankruptcy and which is now worth several billion dollars.

But Mr Malone has minimal experience in physical retail. Liberty is best known for its online and television holdings, which include the QVC home shopping channel, a collection of websites, and the Starz television channels.

Barnes & Noble has been on the block since last summer. Many bankers had said they did not expect an external bidder to come forward. The company’s founder, Leonard Riggio, was seen as one potential buyer.

Barnes & Noble was profitable for the three months ending January 29, with net income of $60.5m for that period. But the bookseller lost $14.5m for the 39 weeks ending then.
But Barnes & Noble has made swift inroads in the digital reading market. Its Nook e-reader is selling well, and the company has become the main competitor to Amazon’s Kindle e-reader and e-book store.

The company said Liberty’s offer was contingent on the approval of Mr Riggio and his continued involvement in management. Mr Riggio purchased a large block of shares in the company last August at $16.96 per share. Mr Malone’s offer of $17 per share means Mr Riggio would not take a loss on that investment.

The $17 per share offer represents a 20 per cent premium on Thursday’s closing price of $14.11. In after-hours trading, Barnes & Noble shares were up nearly 25 per cent to $17.50.

No comments: