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Liberty Media Execs Explain Barnes & Noble Bid

Chairman John Malone and CEO Greg Maffei made their first public comments on the proposed deal at a meeting where shareholders approved a planned split-off of Liberty Starz and Liberty Capital.

NEW YORK - Strong management, an emerging digital business, opportunities to become a bigger retail-plus-device player much like Apple and a chance to put e-reader software on more Android-powered devices than just the Nook e-reader - that is how Liberty Media chairman John Malone and CEO Greg Maffei on Monday explained their interest in book retail giant Barnes & Noble.

Liberty last week unveiled a surprise $1 billion bid for about 70 percent in the company, which would be attributed to its Liberty Capital arm.

Management's first public comments on the proposed deal came at a special meeting in Denver Monday that saw shareholders approve the planned split-off of Liberty Starz and Liberty Capital.

Malone compared Barnes & Noble to Sirius XM, which has been a successful investment for Liberty. Maffei said that while nothing will be as good an investment as Sirius, in which Liberty took a stake - whose value has multiplied - when it faced financial stress, Liberty is focused on the business fundamentals of Barnes & Noble and sees upside in them. Any possible synergy with other Liberty assets would be pure icing, although cross-selling and -promoting products, such as selling Nooks on Liberty's QVC, would be a bonus, management said. "QVC could do very well selling Nooks," suggested Malone.

Maffei lauded Barnes & Noble for being a leader in its space, having a strong management team led by Len Riggio, who the company has said it wants to continue running the business, operating expertise and having made "great progress in the transition to digital" with e-book sales and its Nook e-reader.

Maffei also said there is an opportunity for even better interplay between B&N stores and devices, citing Apple as a role model. Apple is doing well in the digital and retail worlds and does better business per store square foot than others, he said. "We'd like to think that Barnes & Noble is beginning that trend" that will get it to a similarly strong performance across its various businesses.

Maffei cited 40 million customers, solid traffic to barnesandnoble.com site and the firm's big share of the college market as additional  reasons to find the book giant attractive.

Maffei also discussed possible upside from expanding the Nook business further. The Android-based Nook could make its e-reader software an addition to other Android devices, which may take a majority of market share, he said in explaining one opportunity. Executives also said that the Nook, whose latest model features not only email functionality, but also apps, could become a player in the broader tablet market.

While a B&N deal, which could be agreed on within weeks before months of regulatory approvals, is a significant investment, "we are not betting the company," Malone summed up. Saying that he has been a B&N client for "many, many years," he predicted that "there will be a physical [store] presence for a long, long time to come, and it will be a physical presence."

Liberty management also got questions on its planned spins now that shareholders have approved the split-off of Liberty Starz and Liberty Capital from Liberty Interactive.

Liberty management on Monday once again signaled that the split-off should occur around mid-year.

The Delaware Court of Chancery recently sided with the company after the Bank of New York raised issues about the split-off. The bank had argued that the split-off would constitute a disposition of all or substantially all the assets of Liberty Media.

The judgment is subject to appeal. Maffei said an appeal would have to come by June 8.  If one is filed, it would likely be another 30-60 days until a final ruling, he added.

Malone said he has "very high confidence" that Liberty will prevail.

Malone even got a shareholder question about Liberty's Live Nation investment, which makes it the largest investor in the concert promoter.
Live Nation's promise is "so far unfulfilled, but "that process is going to take time, he said.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai