John Malone’s Liberty Media is investing $204 million in Barnes & Noble via preferred stock that could be converted into a 16.6% stake in the nation’s largest bookseller, but the deal, which was announced on Thursday, is a far cry from the highly touted acquisition of B&N by Liberty Media for a billion dollars that was announced in May (see “Liberty Media Offers $1 Billion for Barnes & Noble”).  Liberty’s preferred shares pay a dividend of 7.8% annually and can be converted into common shares at a price of $17 per share, which was the figure announced in the original takeover deal.
A few weeks ago the New York Post reported friction between Liberty Media’s John Malone and B&N’s Leonard Riggio was holding up the deal, but that report was denied by the companies who said it was arranging financing with suitable terms, not friction, that was impeding progress.
While Liberty’s investment does provide B&N with additional capital, Bloomberg quoted an analyst who pointed out that a Liberty takeover would have provided more capital and made it easier for the company to keep investing in its Nook e-reader to foster long term growth without as much emphasis on short term profitability.  Same store sales have been dropping for Barnes & Noble as digital sales grow and buying patterns change.  As a result of these trends and of continued investments in its Nook Barnes & Noble has posted losses in four out of the five most recent quarters (see “Barnes & Noble Loses $59 Million”)..
As a result of Liberty’s $204 million investment, the company will get two seats on the B&N Board of directors, which will expand from nine to eleven members.  Barnes & Noble stock fell 90 cents or 6.9% and finished at $12.09 on Thursday.