Pearson Invests $89.5 Million In Barnes & Noble Sub, Nook Media

Despite the claims of ‘super activist’ Rick Shottenfeld, it certainly looks like the Nook is the more attractive part of Barnes & Noble (BKS) these days. After partnering with Microsoft (MSFT) earlier this year, the company has sold a 5% stake in Nook Media LLC to Pearson (PSO) for ~$89.5 million in cash, valuing the company at ~$1.79b. Additionally, Pearson can obtain an additional 5% of the company if certain conditions are met. The move is expected to ‘accelerate customer access to digital content by pairing its [Pearson’s] leading expertise in online learning with NOOK Media’s expertise in online distribution and customer service.’ In addition to the strategic benefits, the move should also provide Nook with some more cash to burn. The company revealed today that Nook sales have been slower than anticipated, and it will need cash, and friends, in this fiercely competitive market.

BKS popped over 5% on the news, but not everyone is convinced that the Nook will be the company’s savior. After the transaction, Barnes & Noble will own ~78% of the NOOK Media subsidiary and MSFT will own ~17%. That means BKS, with its sub-$1b market cap, is still trading at a discount to the private market valuation of its Nook subsidiary. Says a lot about what people think about brick and mortar these days or perhaps that is why some investors are clamoring for a spinoff of the unit. The company provided no update on that front though, but you can be sure that we will keep you updated whenever it does.

Disclosure: Author holds no position in any stock mentioned.