The book store will make Nook media a separate company that will deal with the Nook and its e-book business, as well as its line of college stores. While their retail book stores have been struggling as well, largely due to competition form Amazon, they are performing better than the e-reader and e-book businesses.
"By definition, if you separate retail from Nook media you're bound to attract different kinds of investors from the capital markets," Barnes & Noble Chief Executive Officer Michael Huseby said in an interview.
The two companies are expected to be formed by March 2015. This move has long been expected by investors, who reacted positively by pushing up the company's stock value by 14 percent.
By splitting from its digital operations, which have been a drain on the company's resources, it could make the core retail business more attractive to potential buyers. Nook has seen a loss of $700 million in the last two fiscal years, whereas the retail stores have earned $354 million in 2014 so far. The company's college book stores have been profitable but not enough to offset the Nook's losses.
"We're in a better position to do this today," Huseby said. "Separating the businesses will enable us to capitalize them more efficiently and unlock shareholder value."
The breakup is not the first in the media industry, as companies are spinning off loss-making units to concentrate on their core businesses. Time Warner spun off its magazine unit Time Inc. earlier this month and the Wall Street Journal's owners, News Corp, separated 21st Century Fox last year.