Shares in Barnes & Noble Inc rose 23 percent on Thursday after a
report that its partner Microsoft Corp is considering an offer to
acquire all of Nook Media's digital assets.
Microsoft already owns a
substantial stake in Nook Media, which makes e-readers and tablets, but
the technology website TechCrunch reported Microsoft was proposing a $1
billion offer to buy all of Nook's digital assets. Nook Media also
includes the college bookstore chain, though it was not clear if that
business would be included.
The report also suggested that Nook
would stop selling Android-based tablets entirely by the end of fiscal
2014 in favor of distributing content via other publishers' platforms.
first acquired a roughly 17 percent stake in the Nook Media unit from
Barnes & Noble a little more than a year ago, in a deal that valued
the entire business at $1.7 billion. In December the British publisher
Pearson Plc bought a stake in the unit at a $1.8 billion valuation.
sales have disappointed since. Revenue dropped 26 percent in the most
recent holiday quarter, as Nook sold fewer units and had to cut prices.
Just this week, the company slashed the price of its best tablet by
one-third as a special promotion for Mother's Day.
analyst Alan Rifkin, in a note to clients Thursday, said a lower
valuation for the unit was appropriate and that $1 billion was even
higher than he had modeled.
It was not clear from the TechCrunch
story whether Microsoft has formally made an offer to Barnes &
Noble's board, or whether Barnes & Noble has replied. Barnes &
Noble declined to comment and Microsoft was not immediately available.
in the bookselling chain rose to $21.89 in early trading from a $17.77
close on Wednesday. The stock last traded at those levels a year ago,
around the time of the initial Microsoft investment.
The stock is
also heavily shorted, with almost 36 percent of its float sold short as
of April 15. Short sellers borrow stocks and sell them, betting the
price will fall. Where short interest is high, that can exacerbate a
rally, as people rush in to cover their positions.
in a note to clients, said the suggested terms of the Microsoft offer
implied that Barnes & Noble was worth about $27 per share.
Could speed other sales
this year, Barnes & Noble chairman Leonard Riggio said he wanted to
buy the company's chain of nearly 700 namesake bookstores. Selling off
Nook could simplify that process.
Barnes & Noble first
indicated it might spin off the Nook business in early 2012. The
retailer has spent hundreds of millions of dollars on the unprofitable
unit, trying to make the devices competitive against devices by Amazon,
Apple and Google, among others.
The latest IDC market share data
for tablets, released earlier this month, leaves Barnes & Noble out
of the industry's top five vendors, suggesting it has less than 2
percent of the overall global market.
One analyst following Barnes & Noble said the deal, if it happens, would be dramatic but not necessarily surprising.
must be careful here because details are lacking, but with devices
phasing out, we see sale of the digital assets as an effective sale of
the entire Nook business, unless co-ownership or leasing of digital
content is arranged," Stifel analyst David Schick said in a research
© Thomson Reuters 2013