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.
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