Barnes & Noble Inc Chairman Leonard Riggio, joining a growing list of executives lining up to buy the fading companies they founded, offered to buy the bookseller's declining retail business, leaving it to focus on its more promising Nook e-reader and college bookstores.
Barnes & Noble's shares rose as much as 11 percent to $15.00 in morning trading, valuing it at about $900 million.
The New York-based company's retail business has struggled in recent years as book buyers switched to digital formats, underscored by a 10.9 percent fall in sales at its bookstores and website in the critical year-end holiday period.
The bookseller, which saw a short-lived rise in sales after the September 2011 liquidation of rival Borders Group, has said it expects to shut down as many as a third of its retail stores over the next decade.
"Riggio loves the (retail) business too much to let it go," Morningstar analyst Peter Wahlstrom said, adding that as a slow-growing business it did not need a lot of capital to keep going.
Barnes & Noble created a separate unit in October combining its Nook e-reader and college bookstore businesses. Riggio, who owns 30 percent of the company and is its biggest shareholder, said he would not buy that business, Nook Media.
The company said in January 2012 that it might spin off its e-reader business.
The combined college book and Nook business, which includes the e-reader, digital content and accessories, contributed about 50 percent of the company's total sales of $1.88 billion in the second quarter ended October 27.
The Nook business had an operating loss of $58.2 million in the quarter, largely because of heavy investments, while the college business had an operating profit of $75.9 million.
Barnes & Noble launched the Nook in 2009 to compete with Amazon.com Inc's market-leading Kindle, and its success with consumers attracted Microsoft Corp , which invested $300 million in the business last year.
British education and media group Pearson Plc said in December it would take a 5 percent stake in Nook Media for $89.5 million, valuing the unit at $1.8 billion. That left Barnes & Noble with 78.2 percent of the business and Microsoft with 16.8 percent.
Barnes & Noble has poured hundreds of millions of dollars into its Nook business, but a disappointing holiday season raised questions about its growth prospects.
Revenue from the e-reader business fell 12.6 percent from a year earlier in the nine weeks ended December 29.
The company also said the loss from the Nook business would probably be bigger than expected in fiscal 2013 ending April 28 and that sales for the year would fall short of the $3 billion it had forecast.
LIBERTY MEDIA THE "WILDCARD"
The purchase price for the retail assets is expected to comprise mainly cash and include the assumption of certain debt, Riggio, said in a regulatory filing on Monday. (http://link.reuters.com/byc36t))
Riggio, who pioneered the book superstore format in the 1980s and 1990s, said he would provide the equity financing and arrange any debt financing for the deal.
Riggio joins the growing ranks of executives or former executives trying to buy the companies they founded, including Dell Inc Chief Executive Michael Dell and Best Buy Inc founder Richard Schulze.
John Malone's Liberty Media Corp offered to acquire Barnes & Noble for $17 per share, or $1 billion, in May 2011, but talks fell through and Liberty invested $204 million in the company instead. (http://link.reuters.com/med36t)
"The wildcard here is Liberty. They like Riggio but they have different interests," Maxim Group analyst John Tinker said.
Liberty took a 16.6 percent stake in Barnes & Noble by buying preferred stock that can be converted into about 12 million shares.
The big question now is what Riggio is willing to pay for the business and whether a rival bidder emerges, Tinker said.
Barnes & Noble said it had set up a committee of three independent directors to evaluate Riggio's proposal.
Evercore Partners will serve as financial adviser to the company and Paul, Weiss, Rifkind, Wharton & Garrison LLP will be legal advisers, the company said.
The Wall Street Journal reported the proposed deal on Sunday.
Barnes & Noble is scheduled to report third-quarter results on Thursday.
(Reporting by Siddharth Cavale in Bangalore; Additional reporting by Phil Wahba and Olivia Oran in New York; Editing by Ted Kerr)