The deal has been on the burner since 1996 when Barnesandnoble.com first approached Fatbrain's founder Chris MacAskill about an acquisition deal. Although no deal was struck at the time, the mutual admiration between the two companies began to grow and yesterday's deal, announced after the closing bell, signalled the online bookseller's intention to expand its new digital publishing and print-on-demand capabilities.

Under the terms of the merger pact, barnesandnoble.com will pay $4.25 per share for all the outstanding shares of Fatbrain.com. Fatbrain will become a wholly owned subsidiary of barnesandnoble.com LLC. The consideration is comprised of 75 percent stock in barnesandnoble.com and 25 percent cash for each Fatbrain.com share.

Investors, apparently balking at sale price, were bailing out on Fatbrain in early morning trading. Fatbrain's stock, which closed at $4.39 dipped 14 percent to $3.75, well off the 52-week high of $42.25. But, for Barnesandnoble.com, the news was well received on Wall Street. Shares were going for $4.71, up 8 percent from last night's $4.37 close.

Steve Riggio, vice chairman of Barnesandnoble.com said Fatbrain's B2B model was attractive. "We believe Fatbrain.com's business-to-business focus, combined with its digital publishing and print-on-demand capabilities, complement Barnes & Noble.com's consumer-based initiatives in these areas," Riggio said.

The companies said Fatbrain.com's senior management, including its president and CEO, Dennis Capovilla, and executive vice president of product development, Kim Orumchian, would continue in their current positions, and the company would remain headquartered in Santa Clara, Calif.

With the acquisition, Barnes & Noble.com would own approximately 50 percent of MightyWords, a digital content provider which is a former subsidiary of Fatbrain.com. Back in June, Barnesandnoble.com invested approximately $20 million for a 30 percent equity stake in MightyWords. Fatbrain.com retained an equity stake of approximately 23 percent in MightyWords.

The deal is seen as an attempt by Barnesandnoble.com to jostle for positioning in the e-publishing marketplace. While retail giant Amazon.com remains the dominant player in the space, industry experts believe the Fatbrain acquisition will give Barnesandnoble.com an established presence.

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