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Barnes & Noble lands $300 mln Microsoft investment

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Microsoft (NASDAQ:MSFT) Monday revealed plans to invest $300 million in Barnes & Noble's (NYSE:BKS) Nook e-reader and college text businesses.

Monday morning, shares of the bookseller soared more than 60 percent to $22.60.

The surprise alliance aims to capitalize on the transformation in the publishing world in favor of rapidly-growing digital text.

"Microsoft's investment and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business," Barnes & Noble CEO William Lynch said.

Microsoft president Andy Lees added: "The shift to digital is putting the world’s libraries and newsstands in the palm of every person’s hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content."

As part of the deal, the two companies are forming a new Barnes & Noble subsidiary that will house the Nook and college businesses and after the investment by Microsoft, will have a valuation of $1.7 billion.

The new division, being called Newco for now, will be 82.4 percent owned by New York-based Barnes & Noble, while Microsoft will own the remaining 17.6 percent.

The alliance includes a deal to produce a Nook application for Microsoft's Windows 8 operating system.

Barnes & Noble disclosed plans in January to consider a spinoff of its digital business to maximize shareholder value.

It now says it plans to "explore all alternatives for how a strategic separation" of the new division may occur, but warned there is no guarantee it will result in a stand-alone public company.

Microsoft and Barnes & Noble also said they have settled their patent litigation, and Barnes & Noble and Newco will now have a royalty-bearing license under Microsoft’s patents for the Nook eReader and tablet devices.

Quick facts: Barnes & Noble Education

Price: 3.43 USD

NYSE:BNED
Market: NYSE
Market Cap: $163.29 m
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