Liberty Media to Buy Barnes & Noble

Liberty Media Corp. (LINTA - Analyst Report) recently announced its intention of acquiring the leading chain of bookstore in the U.S, Barnes & Noble (BKS - Snapshot Report) for a cash consideration of $17 per share.  

Liberty Media expects to diversify its operations through the acquisition of Barnes & Noble. Liberty Media has cash reserves of more than $3 billion and the company plans to utilize the abundant cash in purchasing assets of different companies. 

On the other hand, Barnes & Noble boasts a huge retail presence across the U.S., and expects to gain from the proposed acquisition as Liberty Media will enhance its online product sales.

Recently, another leading book retailer and Barnes & Noble’s close rival Borders Group, Inc. filled for a Chapter 11 bankruptcy protection, listing $1.275 billion in assets and $1.293 billion in debts in its filing. The company even had to close down 226 stores. So it will be wise on Liberty Media’s part to evaluate the debt position of Barnes & Noble before they go ahead with the acquisition.

Earlier, Liberty Media reported solid top-line growth in the first quarter of 2011. Quarterly total revenue of $3,131million handily surpassed the Zacks Consensus Estimate of $2,187 million and improved 54.6% year over year mainly driven by increased sales at shopping network QVC.

We believe that the company’s modest result along with share buy back plan will drive the stock forward.

Meanwhile, emergence of new technologies like video-on-demand, digital video, and IPTV may hinder the growth of Liberty Media’s TV home shopping business in the future. Furthermore, the stock price has jumped up by nearly 60% in the last one year and reflects all positive factors, in our view.

We, thus, maintain our long-term Neutral recommendation for Liberty Media. Currently, Liberty Media has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

Read the full analyst report on LINTA

Read the full analyst report on BKS