Barnesandnoble.com Gobbles Up Fatbrain

After the deal closes, the Santa Clara, California-based Fatbrain.com will become a wholly owned subsidiary of Barnesandnoble.com, but will continue to operate as an independent entity.

"We are extremely excited about our proposed merger with Barnesandnoble.com," said Dennis Capovilla, president and chief executive officer of Fatbrain. "The synergies derived from our book businesses are an obvious fit and will naturally benefit from increased scale," he added.

Under the terms of the deal -- which is subject to regulatory and stockholder approval -- Barnesandnoble.com will pay $4.25 per share for all the outstanding shares of Fatbrain.com. The transaction will be comprised of 75 percent stock in Barnesandnoble.com and 25 percent cash for each Fatbrain.com share.

Fatbrain closed Wednesday at $4.39.

Fatbrain's senior managers, including Capovilla and executive vice president of product development Kim Orumchian, are expected to continue in their current positions.

In addition to running a stand-alone online bookstore, Fatbrain.com also has more than 500 co-branded online bookstores and information resource centers at a variety of companies, including Ford Motor Company, Microsoft (Nasdaq: MSFT) and Hewlett-Packard (NYSE: HPQ) . Each distributes both third-party published works and proprietary corporate materials from the sponsoring company.

Fatbrain.com says that its Web-based services reach more than 3.5 million employee desktops at almost 350 Fortune 1000 companies worldwide.

Adding MightyWords

With the acquisition of Fatbrain.com, Barnesandnoble.com also ups its stake in MightyWords -- a former Fatbrain.com subsidiary and online provider of digital content -- to approximately 50 percent.

In June, Barnesandnoble.com invested approximately $20 million for a 30 percent equity stake in MightyWords, and Fatbrain.com retained an equity stake of approximately 23 percent in the company.

Latest Fatbrain.com Financial Results

On Wednesday, Fatbrain.com also released its quarterly financials for the second quarter of fiscal 2001, which ended July 31st. The company reported a pro forma net loss for the second quarter of $8.0 million, or $0.62 per share, compared to a net loss of $5.9 million, or $0.52 per share in the same quarter of the prior year and a pro forma net loss of $8.5 million, or $0.65 per share, for the preceding quarter. Pro forma online revenue for Fatbrain.com, excluding revenue from MightyWords and before the completion of its financing on June 5, 2000, totaled $13.6 million. This figure reflects an increase of 134 percent from online sales of $5.8 million for the second quarter of the prior year, and an increase of 12 percent from pro forma online sales of $12.1 million for the preceding quarter. Total pro forma revenue, which includes sales generated by two physical retail stores and trade shows, totaled $15.3 million, compared to revenue of $7.4 million for the same period last year and $14.0 million of pro forma revenue for the preceding quarter.