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Fund That Cashed in on Nook Bets on Marathon Petroleum

On Monday, Jana Partners saw giant profits in one of its newer investments, when Barnes & Noble announced that Microsoft will take a near-20% stake in the spinoff of its Nook digital books and tablets business, in a deal that values the unit at $1.7 billion. Jana recently unveiled a 12% stake in the struggling bookseller, which DiDomenico said the company first built in January.

"Barnes & Noble was not an activist investment," said DiDomenico, who noted that in the firm's analysis, they felt the bookseller's languishing shares in effect gave them an interest in its attractive Nook eReader business for free. "We believe we are in the early innings of an eReader revolution," said DiDomenico. In January, Barnes & Noble said it was exploring a spinoff of the Nook business from its traditional brick and mortar bookselling business after cutting it's 2012 earnings outlook. In Monday's partnership, Microsoft will run Nook on its soon-to-be released Windows 8 operating system and will settle patent related lawsuits.

While Jana Partners had not disclosed support for a spinoff or a full sale of Barnes & Noble in making its investment, DiDomenico said, "the Microsoft investment will fortify the Nook business and position it for success," after the company solidified its position as the second leading eBook business to Amazon's Kindle.

The firm's Barnes & Noble success highlights that Jana Partner is not solely focused on activist investments, targeting just 33% of its portfolio toward change-based causes, noted DiDomenico. Even in those pushes, he said that the firm still needs to see a value in share prices and an investing premise that works even if a change campaign fails. "We don't want to enter any situation where there is only one way out," he said.

In the Marathon Petroleum push, DiDomenico said that Jana Partners is close to realizing added share value after a $10 share gain on the heels of the company's decision to buyback $2 billion in shares and consider an IPO of its midstream businesses in an MLP.

-- Written by Antoine Gara from New York.
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