Barnes & Noble should spin off its Nook Media unit of e-readers and e-books, fulfilling a strategy the company said it was exploring at the start of 2012, according to a letter sent by an investor to company management on Friday.
Rick Schottenfeld, head of investment firm the Schottenfeld Group, said in a letter sent to Barnes & Noble that the company should follow through on a proposal to spin off its fast growing Nook business into a separate publicly traded company.
. . . .
In the Friday letter sent to Barnes& Noble chairman Leonard Riggio, Schottenfeld argued that significant stockholder value is trapped within the company’s conglomerate structure, which includes a declining but cash flow positive physical bookstore business and, Nook, its fast-growing but money losing digital books and tablet unit.
Schottenfeld argued Barnes & Noble’s mature and cash generating retail unit isn’t a good fit with its high growth Nook business in public markets. A spinoff, he said, would give investors reason to pay higher multiples for Barnes& Noble’s combined assets. Meanwhile, the investor also argued investing Barnes& Noble’s legacy bookstore cash flow into Nook has been a poor use of the company’s liquidity.
“Unfortunately, what we are left with today is a dysfunctional business with two divisions that are seemingly at odds with each other,” wrote Schottenfeld.
Link to the rest at Minyanville