Amazon to buy Audible for $300 million

NEW YORK Thu Jan 31, 2008 1:54pm EST

A worker checks a shipment of outgoing boxes at the Amazon.com warehouse facility in New Castle, Delaware, November 24, 2006. Amazon.com Inc said on Thursday that it reached an agreement to buy Audible Inc, a provider of digital audiobooks, for $11.50 a share, in a deal that bolsters the online retailer's offerings of audio downloads. REUTERS/Tim Shaffer

A worker checks a shipment of outgoing boxes at the Amazon.com warehouse facility in New Castle, Delaware, November 24, 2006. Amazon.com Inc said on Thursday that it reached an agreement to buy Audible Inc, a provider of digital audiobooks, for $11.50 a share, in a deal that bolsters the online retailer's offerings of audio downloads.

Credit: Reuters/Tim Shaffer

NEW YORK (Reuters) - Online retailer Amazon.com Inc said on Thursday it reached a deal to buy digital audio books provider Audible Inc for about $300 million, aiming to bolster its audio download offerings.

Amazon has been building a digital music store to compete with Apple Inc's iTunes, and has signed deals with major music companies like Vivendi's Universal Music Group and Warner Music Group Corp.

One analyst speculated that Apple might want to counter-bid for Audible. Even though Amazon would be paying $11.50 a share, a 23 percent premium to Audible's Wednesday Nasdaq close of $9.33 a share, the price is still something of a bargain since Audible traded as high as $14.22 only about two months ago, he said.

"We have long suspected that Apple would be the party most interested in acquiring Audible considering the close ties between the two companies," Richard Fetyko, an analyst at Merriman Curhan Ford, said in a note to clients.

"Audible's audiobook content is sold within Apple's iTunes online music store, which represents about 25-30 percent of Audible's revenue."

Apple declined to comment on the Audible deal.

Audible's over 80,000 programs, including audiobooks from authors such as Stephen King and Jane Austen, may complement Amazon's MP3 digital music store, which was launched in September 2007 and now includes more than 3.3 million songs.

Amazon has also been moving into the market for digital books with the introduction last year of Kindle, its portable wireless book reader.

"Audible was already the exclusive partner for Amazon's digital audio offering on Amazon.com. Audible will benefit from an immediate branding event and become integral to the very bright future of Amazon Kindle," said Stifel Nicolaus analyst Scott Devitt in a client note.

Audible ended its fiscal third quarter in September with 455,000 members to its AudibleListener service.

Under the agreement, Amazon would start a cash tender offer to purchase all of the outstanding shares of Audible, and would assume Audible's outstanding stock-based awards. The pact includes Audible's cash and short-term investments.

Audible has about 160 employees with headquarters in Newark, New Jersey. It has an office in London, with 15 employees.

The deal comes one day after Amazon reported strong fourth-quarter profit growth and a 42 percent rise in revenue, but its shares dipped in after-hours trade on concerns about its profit margins.

Amazon shares on Thursday tumbled to $68.84, but recovered in afternoon trading to $74.85, up 64 cents, or just under 1 percent.

(Reporting by Franklin Paul; Editing by Dave Zimmerman and Gerald E. McCormick)

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