Liberty Media Corp, run by billionaire John Malone, has abandoned buying Barnes & Noble, but has bought a minority stake in the largest bookstore chain in the US, three months after it proposed acquiring the company for $1.02-billion.

Liberty, the Englewood, Colorado-based entertainment and e-commerce conglomerate, has invested $204 million by purchasing new preferred stock that can be converted into 12 million common shares.

The shares, which represent 16.6 per cent of Barnes & Noble stock, were purchased at $17 each.

The minority-stake deal will give Liberty two board seats to Barnes & Noble, which will be expanded to 11 members.

In May, Liberty made a $1.02-billion buyout offer for 70 per cent control of New York-based Barnes & Noble, 10 months after the world's largest bookseller had put itself for sale. (See: Barnes & Noble receives $1.02 billion buyout offer from Liberty Media Corp)

Liberty had offered Barnes & Noble $17-a-share in cash, valuing the company at $1.02 billion including $450 million debt. The offer represented a premium of 20 per cent to Barnes & Noble's closing stock price of $14.11 on 19 May, a day before Liberty made the offer.

The deal would have given Liberty the online business of Barnes & Noble, one of the Web's largest e-commerce sites, which also features more than two million titles for its electronic reader, Nook Bookstore.

Barnes & Noble's Nook e-reader is the second largest after Amazon's Kindle digital-book reader, which Barnes & Noble has been developing to counter the erosion of paper-book sales.

According to some media reports, the deal fell apart because the two companies could not agree on a valuation for Nook amid the volatile stock market.

Liberty Media has interests in a broad range of electronic retailing, media, communications and entertainment businesses through three publicly traded companies. Liberty Interactive group includes Liberty Media's interests in QVC, Provide Commerce, Backcountry.com, Celebrate Interactive, Bodybuilding.com, Evite, and Expedia.

Liberty Starz group includes Liberty Media's interest in Starz, and Liberty Capital group has intersts in Atlanta National League Baseball Club, and TruePosition, Liberty Media's interest in SiriusXM Radio, and minority equity investments in Time Warner and Live Nation.

The company posted net income of $1.89 billion last year on revenues of $10.98 billion.

Barnes & Noble has seen its sales tumbling as consumers turned to other avenues for books, like online retailers and discounters such as Amazon.com. With cheaper books available on the Web, consumers have resorted to buying e-books that can be read on an e-reader, smartphone or the iPad.

Year over year, Barnes & Noble has seen revenues fall from $5.3 billion in 2009 to $5.1 billion last year and net income fall from $135.8 million to $75.9 million for the same period.