Saturday, August 20, 2011

Liberty Media Invests $204 Million in Barnes and Noble For a 16.6 Percent Stake

PublishersLunch

A day after rumors swirled that Liberty Media had stepped back from buying a 70 percent stake in Barnes & Noble, the bookseller announced Thursday afternoon that Liberty had invested an aggregate of $204 million, through the purchase of newly issued convertible preferred stock, which can be converted into 12 million shares of common stock. The purchase was for the same $17 a share as the original buyout offer - now abandoned - and Liberty will receive a quarterly dividend at an annual rate of 7.75 percent.
Under the deal, which closes today, and subject to the waiting period under anti-trust legislation and BN's annual shareholders meeting, Liberty will be able to elect two members to BN's board of directors. The two nominees, which will expand the board to 11 members, are Liberty Media president and ceo Greg Maffei and senior vp Mark D. Carleton.
As to why the buyout deal fell through, an unnamed source told Reuters the two sides "could not agree on how to value the Nook, with recent volatility in the stock market making it harder to figure out valuations."  The WSJ cited its own unnamed source saying BN's special committee, convened to evaluate proposed bids, "had pushed Liberty to sweeten its initial bid and was asking for more than Liberty was willing to pay."
BN chair Len Riggio said in a statement: "We could not have found a better strategic investor than Liberty Media. Their investment is a strong endorsement of our overall business and the additional capital will further fuel the explosive growth of our digital strategy." Maffei added: "This investment provides Barnes & Noble with capital to grow its business on terms that are attractive for both parties and allows us to play a meaningful role in shaping their success to generate returns for our shareholders and theirs."
Late Thursday evening Ron Burkle, whose BN stake remains just under 20 percent, issued his own statement on Liberty's stake: "While we have grave concerns about the process and the pricing we welcome Barnes & Noble gaining access to Liberty Media’s expertise. We have the utmost respect for John Malone as a great investor with a proven track record." Burkle also called the addition of "world class directors" Maffei and Carleton to the company's board of directors "positive steps towards better governance."

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