Liberty Media 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 yesterday in a statement. The preferred shares will pay a 7.8 percent annual dividend. Liberty Media, based in Englewood, Colorado, made the only public bid when it offered $17 a share in May for 70 percent of the retailer, valuing the chain 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. (WMT) and digital books. The move followed a public dispute with Ron Burkle, the company’s second-largest shareholder, who pushed for changes.
Liberty’s investment allows Barnes & Noble to spend more on its Nook e-readers to keep up with competitors and gives Malone exposure to a changing industry, Bill Kavaler, a New York-based analyst at Oscar Gruss & Son Inc., said in an interview.
“John Malone likes to buy low-cost calls on interesting potential and ideas and Barnes & Noble is interesting as the only national book chain that’s standing,” Kavaler said. “For $200 million, he’s got a shot at seeing what happens.”
Barnes & Noble, based in New York, fell $2.11, or 17 percent, to $9.98 at 4 p.m. in New York Stock Exchange composite trading. That marked the largest one-day drop since June 29, 2010. Liberty Capital, the tracking-stock group where Barnes & Noble would have been placed, declined $1.98, or 2.9 percent, to $65.67 in Nasdaq Stock Market trading.
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.
Their appointments “are positive steps towards better governance,” Burkle, founder of Los Angeles-based investment firm Yucaipa Cos., said yesterday in a statement. Yucaipa lost a proxy contest a year ago to replace three Barnes & Noble board members, including founder Leonard Riggio, with a slate led by Burkle after losing a lawsuit to overturn a poison pill anti- takeover defense that capped its stock ownership at 20 percent.
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 Media holds stakes in the Starz Group media business, Sirius XM Radio Inc. (SIRI) and HSN Inc., the home-shopping retailer.
Barnes & Noble Chairman 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.
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