Pearson PLC agreed to buy a 5 percent stake in the Nook e-reader unit of struggling bookstore chain Barnes & Noble Inc, joining Microsoft Inc as a backer of the business.
Barnes & Noble shares rose the most in almost three weeks even after the company said holiday sales were below expectations and the Nook unit will not meet its projection for the next fiscal year.
Publisher Pearson’s investment values Nook at US$1.79 billion, about twice Barnes & Noble’s market capitalization.
“This is a reaffirmation of the valuation that no one believed with Microsoft in this Nook media business,” David Strasser, an analyst at Janney Montgomery Scott LLC in New York, said in an interview. “It’s mixed news today; it’s massive news for the next five years or 10 years for Barnes & Noble.”
Barnes & Noble is getting a second large investor for the Nook business, which includes digital and college-book businesses, after Microsoft’s April investment valued the division at about US$1.7 billion.
The bookstore chain has been losing money as it develops and markets the Nook to take advantage of a growing preference for digital books.
The company’s shares rose 4.3 percent to US$14.97 at the close in New York on Friday, for their biggest gain since Dec. 10. Barnes & Noble, in which John Malone’s Liberty Media Corp has a minority investment, has a market capitalization of US$896.7 million.
Pearson, the owner of a US education publishing business and Penguin Books, is spending US$89.5 million in cash for the Nook stake, according to a statement.
After the transaction, Barnes & Noble will own 78.2 percent of the Nook unit and Microsoft will hold 16.8 percent. Pearson will have the option to purchase as much as an additional 5 percent, according to the statement.
In April, Microsoft invested US$300 million in a new subsidiary that combined Barnes & Noble’s Nook and college businesses.
Barnes & Noble’s retail operations posted a drop in sales last quarter.