Pearson Acquires 5% Stake in Barnes & Noble’s Nook Media Digital Business (BKS)

Shares of Barnes & Noble Inc. (NYSE: BKS) gained 4.32 percent on Friday after British publishing and education company, Pearson PLC announced that it has acquired 5 percent stake in BKS’s Nook Media digital business for $89.5 million.

Nook Media, which is Barnes & Noble’s subsidiary, focuses on eBooks and other digital content.

The move will allow Pearson to gain its traction in the rapidly-growing e-reader market while for Barnes & Noble; the deal would bring much needed cash as it continues to expand its e-reader business, which at the moment is unprofitable.

In its regulatory filing on Friday, New York based Barnes & Noble warned that holiday-sales were lighter-than-expected and it was expecting to fall short of its earlier projections made for the fiscal 2013.

Earlier this year, Microsoft Corp. (NASDAQ: MSFT) also invested $300 million in the Nook media. With Pearson joining, the venture is now valued at $ 1.79 billion.

The deal leaves Barnes & Noble with 78.2 percent stake, Microsoft Corp with 16.8 percent rest while Person will hold the remaining stake.

For Pearson, the deal would provide its digital educational content broader distribution. Commenting over the deal, Will Ethridge, Chief Executive Officer, Pearson North America region, said, that both companies will work collectively to offer, “a more seamless and effective experience for students.”

Nook Media’s growth has been so phenomenal that its market capitalization now exceeds Barnes and Nobel’s own market capitalization, which is valued around $900 million, according to analysts. As result, many industry observers fell that Barnes & Noble should spin off its digital media business from its retail business.

Nevertheless, it doesn’t mean that the spinning of business will automatically turn the company profitable. The Company is selling the Nook in an industry which has presence of larger rivals such as Apple (iPads) and Amazon’s Kindle; and, although popularity of e-readers is rising, rising competition is cutting margins.

edliston

edliston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.