Jin Lee/Bloomberg NewsLeonard Riggio, the chairman and largest shareholder of Barnes Noble.
8:28 p.m. | Updated
Liberty Media, the media conglomerate controlled by John C. Malone, agreed on Thursday to buy a stake in Barnes Noble for $204 million, but declined to buy the bookseller outright.
The deal would disappoint investors who had hoped that Liberty, whose investments include Starz Entertainment, the home shopping channel QVC and the Atlanta Braves baseball team, would acquire a majority stake. Liberty had offered in May to buy 70 percent of Barnes Noble for $17 a share if the retailer’s powerful chairman, Leonard S. Riggio, who controls nearly 30 percent of the company, assented.
Under pressure from some large shareholders, Barnes Noble had put itself up for sale last August, but until Liberty showed up, no real bidder had emerged.
While Liberty had begun conducting due diligence on Barnes Noble earlier in the summer, the company grew concerned about both the cost of financing a full takeover and the volatility of the stock markets, people briefed on the matter said.
Liberty’s $17-a-share offer in May, then worth a 20 percent premium to where Barnes Noble’s shares were trading, had raised some eyebrows. Mr. Malone later explained that he was interested in Barnes Noble’s e-reader, the Nook, which is now second only to Amazon’s Kindle in popularity.
He added that a deal for the retailer would be a “flier” for his media conglomerate.
Under the terms of the investment, Liberty would receive preferred shares that can be converted at $17 each into common shares worth 16.6 percent of Barnes Noble. The preferred shares will pay a 7.75 percent annual dividend. Liberty would also get two new seats on Barnes Noble’s board. It has nominated Gregory B. Maffei, its chief executive, and Mark D. Carleton, a senior vice president.
Barnes Noble will use the investment to continue its e-reader strategy, which is built upon the Nook device.
“This investment provides Barnes Noble with capital to grow its business on terms that are attractive for both parties and allows us to play a meaningful role in shaping their success to generate returns for our shareholders and theirs,” Mr. Maffei said in a statement.
Mr. Riggio, who had previously hinted that he was interested in working with Liberty, said in a statement: “We could not have found a better strategic investor than Liberty Media. Their investment is a strong endorsement of our overall business, and the additional capital will further fuel the explosive growth of our digital strategy.”
Earlier on Thursday, shares of Barnes Noble fell nearly 7 percent, to $12.09, after investors grew increasingly worried that Liberty would not try to buy all of the company.
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