Pearson to buy stake in Nook, Barnes & Noble shares up

Fri Dec 28, 2012 1:23pm EST
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By Nivedita Bhattacharjee

(Reuters) - British education and media publisher Pearson Plc has agreed to acquire a 5 percent stake in Barnes & Noble Inc's Nook Media unit for $89.5 million, sending shares of the bookstore operator up as much as 9.7 percent on Friday.

The Nook Media unit comprises Barnes & Noble's digital businesses — including the Nook e-reader and tablets and the Nook digital bookstore — and 674 college bookstores across the United States.

Pearson is the owner of the Financial Times newspaper and the Penguin Group publishing house.

The latest investment in Nook comes after Microsoft Corp agreed in April to invest $300 million in Barnes & Noble's digital and college businesses, a move that sent Barnes & Noble's shares up 79 percent at the time. Barnes & Noble and Microsoft completed that partnership in October.

After the Pearson deal, Barnes & Noble will own about 78.2 percent of Nook Media and Microsoft will own around 16.8 percent, the companies said.

"We always believed that Microsoft was as interested in Barnes & Noble's opportunity in education as it was in the digital consumer arena," said David Strasser, analyst with Janney Montgomery Scott.

"But after this investment from Pearson, it is more clear that Nook Media has its sight set on transforming the way education is administered in the US and around the world," he wrote in a note to clients.

Nook has been a revenue-driver since its launch in 2009 as readers buy more digital books, but product development and marketing costs to keep the devices competitive with Amazon Inc's Kindle have made it an expensive project.   Continued...