May 9, 2013 at 9:21 AM ET
Shares in Barnes & Noble Inc rose 32 percent in premarket trading on Thursday after a report that its partner Microsoft Corp is considering an offer to acquire all of Nook Media's digital assets.
Microsoft already owns a substantial stake in the business, but the technology industry website TechCrunch reported the company was proposing a $1 billion offer to buy the rest of Nook's digital assets. Nook Media also includes the college bookstore chain.
The report also suggested that Nook would stop selling Android-based tablets entirely by the end of fiscal 2014 in favor of distributing content via other publishers' platforms.
Microsoft first acquired a roughly 17 percent stake in the Nook Media unit from Barnes & Noble a little more than a year ago, in a deal that valued the entire business at $1.7 billion. In December the British publisher Pearson Plc bought a stake in the unit at a $1.8 billion valuation.
But sales have disappointed since. Revenue dropped 26 percent in the most recent holiday quarter, as Nook sold fewer units and had to cut prices. Just this week, the company slashed the price of its best tablet by one-third as a special promotion for Mother's Day.
It was not clear from the TechCrunch story whether Microsoft has formally made an offer to Barnes & Noble's board, or whether Barnes & Noble has replied. Barnes & Noble declined to comment and Microsoft was not immediately available.
One analyst following Barnes & Noble said the deal, if it happens, would be dramatic but not necessarily surprising.
"We must be careful here because details are lacking, but with devices phasing out, we see sale of the digital assets as an effective sale of the entire Nook business, unless co-ownership or leasing of digital content is arranged," Stifel analyst David Schick said in a research note.
Shares in the bookselling chain rose to $23.45 in premarket trading from a $17.77 close on Wednesday.
Copyright 2013 Thomson Reuters.