New Barnes & Noble subsidiary brings together company’s digital and College businesses

Apr 30, 2012 11:26 GMT  ·  By

Today, Microsoft and Barnes & Noble announced a new partnership aimed at accelerating the transition to e-reading, the new way in which people consume, create, share and enjoy digital content.

The partnership will materialize with the creation of a new Barnes & Noble subsidiary, currently referred to as Newco, the two companies announced.

Microsoft will make a $300 million investment in the new subsidiary, “at a post-money valuation of $1.7 billion in exchange for an approximately 17.6% equity stake.”

Barnes & Noble will own around 82.4 percent of the new subsidiary. It also announced that Newco “will have an ongoing relationship with the company’s retail stores.” No specific name for the new entity has been yet decided.

The partnership will also result in the release of a NOOK application for Windows 8, set to expand the reach of Barnes & Noble’s digital bookstore.

Additionally, Newco will include Barnes & Noble’s College business. In fact, the company announced that its NOOK Study software would take advantage of the new subsidiary to provide students and educators with a platform for the distribution and management of digital education materials.

“The shift to digital is putting the world’s libraries and newsstands in the palm of every person’s hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content,” said Andy Lees, President at Microsoft.

“Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re at the cusp of a revolution in reading.”

As part of the new partnership, Barnes & Noble and Microsoft also announced that both Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for NOOK eReader and Tablet products.

“The formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the NOOK business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments,” said William Lynch, CEO of Barnes & Noble.

“Microsoft’s investment in Newco, and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business.”