Microsoft invests US$300m into Barnes & Noble e-book subsidiary

30 Apr 2012

Nook tablet

Microsoft has partnered with book retailer Barnes & Noble, investing US$300m to create a new subsidiary focusing squarely at the e-reading market. The deal will also see a Nook e-reading app arrive on Windows 8.

Microsoft will invest US$300m into the subsidiary – called Newco for now – at a post-money valuation of US$1.7bn. The subsidiary will include Barnes & Noble’s digital business and its college business, which offers the Nook study software to students and educators.

Microsoft will get a 17.6pc equity stake into Newco while Barnes & Noble will retain an 82.4pc stake.

The deal will resolve previous patent litigation between the two companies. Barnes & Noble and Newco will have a royalty-bearing licence under Microsoft patents for its Nook e-reader and tablets.

There will also be a Nook e-reading application for Microsoft’s upcoming OS Windows 8, offering US and international users access to Barnes & Noble’s digital bookstore.

It’s a step for Microsoft into the e-reading market in which Amazon and Apple dominate and will help the company bolster its content offerings for its platforms. Barnes & Noble has a 27pc share of the e-book market and sells three times as many e-books compared to physical books online.