Indigo to sell stake in Kobo e-reader

Indigo Books and Music Inc. is selling its fastest growing unit, e-book seller Kobo Inc.

Indigo Books and Music Inc. is selling its fastest growing unit, e-book seller Kobo Inc.

Indigo announced the sale to Rakuten Inc. of Japan on Tuesday. Indigo, Kobo's founder and majority shareholder, will get between $140 million US and $150 million out of the total purchase price of $315 million.

Indigo shares closed at $6.73 on the TSX on Tuesday, up almost five per cent on the day. At those levels, the company has a total market cap of $169 million — slightly more than the proceeds it will pocket from the sale of Kobo.

Founder Indigo has announced the sale of Kobo, which makes ereaders. (Indigo Books and Music/Canadian Press)

"Notwithstanding the sale, Indigo will maintain a very strong relationship with Kobo, supporting the products and the services both in store and online and directly benefiting from the growth of the Canadian ereading market," said Heather Reisman, CEO of Indigo and chair of Kobo.

Rakuten is "the right global partner" so Kobo can expand and grow, Indigo said. 

Sales from the  Kobo division were up 219 per cent in the second quarter, ended Oct. 1, Indigo said Tuesday. Sales at the  Indigo and Chapters superstores fell  4.3 per cent, while sales at the Coles and IndigoSpirit small-format stores were down 2.9 per cent. reported a 1.1 per cent sales gain.

Indigo reported a loss of $40.4 million ($1.39 a diluted share)  compared with a loss of $4.6 million (seven cents) a year earlier. Sales were $218.5 million, compared with $214.8 million.

The federal government must approve the sale. The deal is expected to close early in  2012.

Kobo will continueas a stand-alone operation with its headquarters, management team, and employees based in Toronto, Indigo said.

Indigo stock has slumped for the past year, falling from a high of $15.86 to a 52 week low of $6.30.