Liberty drops Barnes & Noble bid, to invest $204M

Posted: August 19, 2011

NEW YORK - Barnes & Noble Inc. said Thursday that Liberty Media, the conglomerate controlled by John Malone, has dropped its $1 billion bid to buy the bookseller and instead will invest $204 million in the company.

In May, Liberty Media Corp. offered to buy all of Barnes & Noble, apparently enticed by the potential of the company's Nook electronic reader.

But Barnes & Noble said the takeover talks had been ditched in light of the investment agreement unveiled Thursday.

Under the terms of the deal, Liberty Media bought preferred stock convertible into about 12 million Barnes & Noble shares at $17 apiece, giving it about a 17 percent stake in the company. The preferred shares will pay an annual dividend of 7.75 percent.

Liberty Media will also get two seats on the company's board of directors, which is being expanded to 11 members. It has nominated Greg Maffei, its president and CEO, and Mark Carleton, a senior vice president at the media company, to take the seats on Barnes & Noble's board.

The investment is another boost for New York-based Barnes & Noble, which recently lost a major competitor with rival Borders Group going out of business.

Barnes & Noble had put itself up for sale last year in response to pressure from billionaire activist shareholder Ron Burkle, but the company didn't strike a deal. Burkle has since significantly trimmed his Barnes & Noble stake.

Barnes & Noble has struggled along with other traditional book sellers facing heightened competition from online retailers such as Amazon.com and discounters such as Wal-Mart Stores Inc.

Leonard Riggio, chairman of Barnes & Noble, said the capital injection from Liberty Media will go toward expanding the company's digital business.

Maffei said Liberty Media is "excited about Barnes & Noble's prospects as the leading bookseller in the U.S. and its growth opportunities in the digital world."

Malone's Liberty Media empire operates three publicly traded companies - Liberty Interactive Inc., Liberty Starz Group and Liberty Capital Group - through which it runs home-shopping network QVC, based in West Chester, Pa., and movie channel Starz. It also holds stakes in online, media and communications companies.

Some industry analysts have speculated that QVC could be used as a marketing vehicle for Barnes & Noble's Nook. The company's reader also has the potential to go beyond books to deliver all types of digital products, including music, magazines, TV shows and movies. That makes it a competitor not just to Amazon.com's Kindle but also to Apple Inc.'s iPad.

On a day of generally unsettled market trading, Barnes & Noble shares were down almost 18 percent ($2.15) to $9.94 in afternoon trading.

Shares in Liberty Media, which is based in Englewood, Colo., were down 2.50 percent ($1.69) to $65.96.

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