Pearson, a publisher of educational books, is poised to sell back its stake in the weakened Nook division to Barnes & Noble for approximately $27.7 million in cash and stock. The move is designed to boost shareholder value and returns full ownership back to Barnes & Noble, which is preparing to split itself into two separate companies next year.
Pearson's exit follows Microsoft Corp.'s decision to sell its 16.8 percent stake in Nook Media recently for about $125 million in cash and common stock. In 2012, Microsoft paid $300 million for a 17.6 percent stake in Barnes & Noble's then-promising Nook business. The termination also relieved Microsoft of any obligation to continue to fund support and other payments set forth in the commercial agreement between the partners. At the time, Microsoft's parting of the ways with Barnes & Noble wasn't surprising given the Nook business' considerable losses.
Meanwhile, Pearson had a 5 percent stake in Nook Media last year valued at $89.5 million, with sellback rights and terms similar to the ones Microsoft received.
Barnes & Noble is the largest bookstore chain in the United States. Its separation into two companies -- one consisting of 658 consumer stores and BarnesandNoble.com, and the other encompassing 714 college bookstores and the Nook digital business -- is anticipated at the end of summer 2015, instead of the earlier target of spring.
The decision to split off Nook's e-reader comes as it struggles to compete with bigger companies such as Amazon.com and Walmart, resulting in a series of heavy losses for the unit. In the company's Q2 earnings report, Barnes & Noble reported the Nook segment (which includes digital content, devices and Nook accessories) had $64 million in revenue, down 41.3 percent from a year ago. More specifically, device sales were down 63 percent year-over-year, and digital content sales (a key factor, given this is where Nook is supposed to make most of its money) were down 21 percent compared to last year.