Barnes & Noble Said to Be in Talks to Sell Nook Outside U.S.

Barnes & Noble Inc., the largest U.S. bookstore chain, is working on a deal to sell its Nook digital devices in stores outside the U.S. for the first time, according to a person familiar with the situation.

The chain is developing a partnership with the U.K.’s Waterstones Booksellers Ltd. to add the Nook to its locations this year, said the person, who declined to be identified because the talks are private. Closely held Waterstones, the largest bookstore chain in the U.K., has about 300 stores.

Barnes & Noble is expanding its digital business overseas to catch up to Amazon.com Inc. (AMZN) and Rakuten Inc. (4755)’s Kobo brand, which both sell devices in the U.K. and other countries. The Nook, released in 2009, has been driving sales growth for Barnes & Noble as more people switch to digital books.

“If they do increase the distribution for the product, it’s obviously a benefit for them,” Michael Souers, an analyst for Standard & Poor’s in New York, said in an interview. “Amazon is still the behemoth in the market, and has the upper hand because they were the first mover in the majority of markets.”

Souers recommends selling Barnes & Noble shares.

Barnes & Noble fell 0.2 percent to $11.95 at the close in New York, where the company is based. The shares gained 2.3 percent last year.

Nook Spinoff

Revenue from the Nook unit, including e-books and devices, rose 43 percent to $448 million in the nine weeks ended Dec. 31 while sales in stores rose 2.5 percent to $1.2 billion. The company said the Nook business may generate $1.5 billion in revenue in the fiscal year ending April 30. That would account for about 20 percent of the company’s sales based on analysts’ estimates for annual revenue of $7.33 billion.

Waterstones, purchased by billionaire Alexander Mamut’s A&NN Capital Fund Management Ltd. last year from HMV Group Plc (HMV) for 53 million pounds ($83 million), doesn’t make its own e- reader. The London-based chain, which posted a decline in annual sales before being sold, began selling e-books and Sony Corp. (6758)’s Reader in 2008.

Mary Ellen Keating, a spokeswoman for Barnes & Noble, and Fiona Allen, a spokeswoman for Waterstones, declined to comment.

Barnes & Noble may spin off its Nook unit to increase shareholder value, the company said Jan. 5. The chain also said at the time that it was discussing partnerships with retailers, publishers and technology companies to expand abroad.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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