Barnes & Noble will spin off its college bookstore business, but hang onto its Nook e-book reader, the company announced on Thursday (Feb. 26).
That's not what most observers expected from B&N's restructuring, which has been in the works for months. Previous speculation was that the largest U.S. bookstore chain would bundle the Nook e-reader with the college business and spin it off. That made sense because the college business sells digital versions of textbooks as well as physical books, and B&N bought out Microsoft's share in the Nook business in December 2014.
Under the new plan, the college business will become a new, independent publicly traded company, Barnes & Noble Education. The breakup is expected to be completed by the end of August 2015, and is structured as a tax-free distribution of shares in the new company to B&N stockholders. B&N said it filed a Registration Statement with the U.S. Securities and Exchange Commission on Thursday.
"Separating Barnes & Noble Education will create an industry-leading, pure-play public company with more flexibility to pursue strategic opportunities in the growing educational services markets," B&N CEO Michael P. Huseby said in a prepared statement. Meanwhile, the retail chain and the Nook e-book business "will be able to leverage a more integrated technology infrastructure for improved efficiency and to better serve digital customers," he said.
Unlike the 649-store Barnes & Noble chain, the college business doesn't lease store space, but has contracts to run 714 stores for U.S. college and university campuses, making it one of the largest U.S. contract operators of bookstores. B&N bought the college business from its founder, Len Riggio, in 2009 for $514 million.
While the college business is profitable and stable -- sales declined less than 1 percent in fiscal 2014 -- it also faces new disruption from an old B&N foe. Amazon said earlier this year that it has struck deals with Purdue University, the University of Massachusetts Amherst, and the University of California Davis to sell textbooks and university apparel to those schools' students through co-branded online bookstores.