By Gina Chon and Russell Adams
Of THE WALL STREET JOURNAL
When Barnes & Noble Inc. put itself up for sale last August,
it reached out to an array of potential investors including Liberty
Media Corp. But it wasn't until recently that Liberty expressed
interest in the bookseller in an effort led by its chairman John
Malone, according to people familiar with the matter.
Liberty's cash offer, which valued the bookseller at $1.02
billion, is the only serious one that Barnes & Noble has so far
received.
Liberty sees an acquisition of Barnes & Noble as one that
carries high risk but also high rewards, these people said. The
bookseller currently has about a 25% market share in e-books, and
if it can maintain or expand that business, the Liberty investment
in Barnes & Noble would be worth it, these people added.
However, Barnes & Noble faces stiff competition from bigger
competitors that also have more capital to invest in their
business, such as Amazon.com Inc. and Apple Inc.
Still, Liberty has been successful in getting into businesses at
the beginning of trends, such as its investment in the
home-shopping network QVC. And Mr. Malone saw growth prospects in
Barnes & Noble's digital platform and wanted to participate in
the e-books trend, people familiar with the matter said.
A spokesperson for Liberty Media couldn't be reached for
comment.
The process, which may not lead to a deal, is in the early
stages and Liberty and Barnes & Noble are not in exclusive
talks, these people cautioned. It's also unclear if the $17 a share
offer is enough to win over the Barnes & Noble board.
Initially, Barnes & Noble executives had hoped the company
would be sold for at least $20 a share, but the bookseller couldn't
come to an agreement with potential suitors and their interest
waned, these people added.
Barnes & Noble shares closed up 30% at $18.33 Friday after
the offer.
Mr. Malone and Barnes & Noble's chairman, Leonard Riggio,
don't travel in the same circles and don't know each other well,
these people added. But they are both successful businessmen and
have a common vision for Barnes & Noble, which prompted them to
partner in the bid for the bookseller, these people said.
Mr. Malone, 70, is known for blazing his own trail in business
and in personality.
A billionaire with a casual cowboy style, Mr. Malone built his
fortune in the early days of the cable business, building
Tele-Communications Inc. into the nation's largest cable-TV
operator.
He's known for his obsessive pursuit of complex business
deals.
Through his Liberty Media, headquartered outside the media
spotlight in Englewood, Colo., he has acquired, traded and spun
assets in myriad media and technology companies over the years,
including recently Sirius XM Radio, buying them when their under
duress and spinning them off as business improves.
His transactions have landed him into sometimes contentious
partnerships with an array of media moguls, from Barry Diller to
Rupert Murdoch, and earned him a smattering of stakes in everything
from travel site Expedia to the Atlanta Braves.
Despite the challenges facing the business and varied interests
from modern art to thoroughbred horses, Mr. Riggio, also 70, has
indicated no interest in disengaging from the business he started
with a single store in New York City's Greenwich Village in the
mid-1960s.
Last summer when Barnes & Noble's board put the bookstore
chain up for sale as activist investor Ronald Burkle waged a proxy
battle for seats on the board, Mr. Riggio, who owns nearly 30% of
its stock, said he was considering putting together an investment
fund to take the company private. Mr. Burkle's efforts to put
directors on the bookseller's board failed to win shareholder
approval.
Over the years, Mr. Riggio has earned a reputation as a savvy
businessman who positioned the chain at the forefront of several
trends. In the 1970s, Barnes & Noble's focus on discounting
best-sellers sparked the growth of hardcover books. In the early
1990s, Mr. Riggio bet on superstores as the future of bookselling.
And later that decade, Barnes & Noble became one of the first
to embrace e-reading technology with its investment in the maker of
a hand-held e-reader.
Barnes & Noble lost significant momentum when it pulled out
of its digital reading ventures in 2003, allowing Amazon to
establish a dominant share of the market with its Kindle.
In recent years, as Barnes & Noble has seen traffic to its
stores fall, the company has invested heavily to make up lost
ground in digital reading technology with the launch of its Nook
e-readers. Mr. Riggio underscored his company's commitment to a
digital strategy when he selected William Lynch, a veteran of the
digital world, as chief executive.
Asked in an interview with The Wall Street Journal why he didn't
cash out and retire, Mr. Riggio described himself as "fully
engaged" in the business and said he wanted to "see to it that
there is another generation of management and leadership here."
--Jessica E. Vascellaro and Jeffrey A. Trachtenberg contributed
to this article.