In a bit of a surprise move, Barnes & Noble announced today that it plans to separate its college business from its retail trade stores and Nook digital business.

The retailer has been considering splitting up the company for about a year, but it was generally thought that the trade segment would be separated from the college and Nook businesses. (The college and Nook business had been housed together in Nook Media.) The second option seen by analysts was that B&N would try to spin-off, or sell, the money-losing digital business. By keeping the trade stores together with the Nook business, B&N creates a company with a strong physical store presence as well as a large, if unprofitable, digital operation.

B&N hopes to complete the spin-off by the end of August, at which time it will create two independent publicly-traded companies. B&N said it believes the separation will "allow each business to optimize its strategic opportunities." The benefits, the company continued, "will also allow investors to assess each business more clearly as a stand-alone company."

Barnes & Noble Education will be headed by current college division CEO Max Roberts. In the fiscal year ended May 2, 2014, the college operation had sales of $1.75 billion and earnings of $35.1 million. For the first six months of fiscal 2015, revenue was $977 million and earnings were $10.7 million.

In its filing with the Securities & Exchange Commission, B&N Education cited the reasons for becoming a standalone company:

"The opportunities and challenges we expect to arise in the immediate future of the Barnes & Noble retail business differ markedly from those of our business. For Barnes & Noble, increasing foot traffic in existing locations, adapting offerings to shifting consumer tastes and patterns and harmonizing the in-store, online and digital experiences will require a fully engaged board of directors and management
team that has a different skill set and experience than those required to execute our goals and strategic initiatives. We believe the Spin-Off will enhance the ability of Barnes & Noble and the Company to focus on their respective strategies."

"Our near-term goals for our business include the expansion of both the scale and the scope of the historic business model and also pursuing growth opportunities more broadly in the education sector, including by enhancing and expanding our digital assets. Achieving these goals will likely require acquisitions or mergers funded, in part, with capital raises and strategic alliances with other companies.
Our business will be separate and distinct from Barnes & Noble’s business and, accordingly, we believe that pursuing such growth opportunities will be greatly facilitated with a capital structure that is tailored for the Company’s needs, separate from those of Barnes & Noble."

In a statement, Mike Huseby, CEO of Barnes & Noble, Inc., said: “Separating Barnes & Noble Education will create an industry-leading, pure-play public company with more flexibility to pursue strategic opportunities in the growing educational services markets. At the same time, Barnes & Noble will be able to better capitalize on improving industry trends and merchandising initiatives within its core retail business. Retail and the NOOK Digital Business will be able to leverage a more integrated technology infrastructure for improved efficiency and to better serve digital customers.”