Barnes & Noble (BKS) Details Pearson (PSO) Deal; Sees Holiday Sales Below Expectations

December 28, 2012 9:05 AM EST
On December 21, 2012, NOOK Media LLC (“NOOK Media”), a majority owned subsidiary of Barnes & Noble, Inc. (NYSE: BKS), entered into an agreement with a subsidiary of Pearson plc (NYSE: PSO) to make a strategic investment in NOOK Media. Pearson has agreed to invest approximately $89.5 million of cash in NOOK Media at a post-money valuation of approximately $1.789 billion in exchange for preferred membership interests representing a 5% equity stake in NOOK Media. Following the closing of the transaction, the Company would own approximately 78.2% of the NOOK Media subsidiary and Microsoft, which also holds preferred membership interests, would own approximately 16.8%, assuming no exercise of pre-emptive rights by Microsoft. In addition, NOOK Media will grant warrants to Pearson to purchase up to an additional 5% of NOOK Media under certain conditions at a pre-money valuation of NOOK Media of approximately $1.789 billion. At closing, NOOK Media and Pearson will be also entering into a commercial agreement with respect to distributing Pearson content in connection with this strategic investment.

In connection with this investment, on December 21, 2012, the Company entered into an amendment to its existing credit agreement with Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto in order to permit the transactions contemplated by this investment and to effect certain other related modifications thereto.

The Company expects to announce its holiday sales results on January 3, 2013. Based on preliminary sales results to date in the holiday period and sales trends, the Company expects its holiday sales results will be below expectations and that the NOOK business will not meet the Company’s prior projection for fiscal year 2013.

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