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Bertelsmann goes online
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October 6, 1998: 6:06 p.m. ET
German media giant to take 50% stake in barnesandnoble.com
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NEW YORK (CNNfn) - German media giant Bertelsmann AG Tuesday agreed to pay $200 million for a 50-percent stake in Barnes & Noble Inc.'s online retail unit, a move which raises the stakes in the online book retailing business.
Under terms of the deal, both companies will also contribute $100 million to the capital of the joint venture. Bertelsmann also said it will contribute certain U.S. resources to barnesandnoble.com from its previously announced BooksOnline service.
The move caught some analysts by surprise. As late as two weeks ago, Bertelsmann officials were denying the company was looking for a U.S. partner in the online bookselling business.
But industry analysts said the popularity of Amazon.com, which bills itself as the world's largest book seller, forced Bertelsmann to alter its strategy.
"For the U.S. market, this was essential to Bertelsmann," said Nicole Vanderbilt, e-commerce analyst at Jupiter Communications. "They had a shot at going it alone in Europe, but in the U.S. with the likes of Amazon.com (AMZN) owning and unbelievable portion of the market, this deal was essential."
With the deal, Barnes & Noble will postpone its plans to take barnesandnoble.com public, which the company announced in August. With barnesandnoble.com posting huge losses, the parent company hoped to keep stock valuations high for both businesses.
Vanderbilt said the Bertelsmann deal could provide the same result in the long run.
"When barnesandnoble.com's numbers were laid bare, they were pretty disappointing," she said. "To shift the focus away from current performance to potential performance can only help their per-share price."
Shares of Barnes & Noble (BKS) closed at 23-9/16, up 3/16 in Tuesday trading. 
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