Liberty Media Corp., controlled by billionaire John Malone, dropped its offer to acquire Barnes & Noble Inc. and instead invested $204 million in the largest U.S. bookstore chain.
Liberty agreed to purchase preferred shares, convertible into 12 million common shares or 17 percent of the company’s stock, at $17 a share, Barnes & Noble said in a statement. The preferred shares will pay a 7.8 percent annual dividend. Liberty, based in Englewood, Colorado, bid $17 a share in May for 70 percent of the retailer, valuing it at $1 billion.
Barnes & Noble hired Lazard Ltd. in August 2010 to pursue a possible sale after three straight years of profit declines amid increasing competition from discount retailers such as Wal-Mart Stores Inc. and digital books. The move followed a public dispute with Ron Burkle, the company’s second-largest shareholder, who pushed for changes.
A takeover would have made it easier for the company to navigate the shift to digital books because it could keep investing in developing its Nook e-readers without as much focus on profitability, Michael Souers, an analyst for Standard & Poor’s Inc., said before the announcement.
Barnes & Noble, based in New York, fell 90 cents, or 6.9 percent, to $12.09 today in New York Stock Exchange composite trading. The shares have declined 15 percent this year. Liberty Capital, the tracking-stock group where Barnes & Noble would have been placed, fell $4.92, or 6.8 percent, to $67.65 in Nasdaq Stock Market trading and has gained 8.1 percent this year.
Digital Reader Liberty Media Chief Executive Officer Gregory Maffei and Mark Carleton, a senior vice president, will join the board of Barnes & Noble, according to the statement.
The bookseller plans to continue investing in the Nook and selling e-books as more consumers shift away from printed books. Those investments have come at the expense of profits as the retailer posted a net loss in four of the past five quarters.
While revenue at Barnes & Noble’s online unit surged 50 percent to $858.1 million in fiscal 2011, its more than 700 retail locations have posted one gain in sales at stores open at least a year in the past 14 quarters.
So-called same-store sales dropped 2.9 percent in the fourth quarter, hurt by bankruptcy liquidation sales at Borders Group Inc. in the period. Ann Arbor, Michigan-based Borders filed for bankruptcy in February. Barnes & Noble posted a net loss of $73.9 million, or $1.31 a share, in the fiscal year ended April 30.
Liberty’s Stakes Liberty Media holds stakes in the Starz Group media business, Sirius XM Radio Inc. and HSN Inc., the home-shopping retailer.
Barnes & Noble Chairman Leonard Riggio founded the company in 1965 with a college bookstore in Manhattan. Six years later, he bought the Barnes & Noble name and its flagship store, beginning a spree of acquisitions, including Doubleday Bookshops. The chain started focusing on superstores, instead of mall sites, in the 1990s, and now has more than 700.
