Back in 2012, Microsoft entered into an agreement with Barnes & Noble to fund their (at the time, quite popular) e-reader/tablet, the Nook. The deal saw Microsoft invest over $300 million in exchange for a 17.6% stake in the rising digital business. However, after years of slumping Nook sales due to the rise of the Kindle and the iPad, as well as Microsoft releasing its own tablet, the Surface line, both companies have agreed to end the pact and split ways.
According to SEC, as part of the split, Barnes & Noble will buy out Microsoft’s share of the struggling business for $62.5 million in cash and 2.7 million shares of its common stock.
Even though Microsoft lost some cash in this deal, the market reacted positively to the news as the company’s stock price climbs by 1.4% ($48.76) at mid-day trade. However, same cannot be said for the B&N shares which are taking a giant hit, currently down by nearly 10% ($20.05).
Barnes & Noble plans to spin off its Nook business into a separate publicly traded company. According to their SEC filing, “Such termination will allow the Company to continue its rationalization of the NOOK Digital business and enhances the Company’s operational and strategic flexibility. The termination also relieves Microsoft of any obligation to continue to fund support and other payments set forth in the Commercial Agreement between the partners.”