Barnes & Noble (NYSE: BKS) announced today that it will acquire Barnes & Noble College Booksellers -- an operator of book stores on college campuses -- for $596 million.

The hitch? Barnes & Noble College Booksellers is owned by Leonard Riggio, the chairman of Barnes Noble. In a press release announcing the deal, Barnes & Noble said that "Based on College's fiscal 2009 results, BKS would have realized incremental earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) of $115 million from acquired operations and assets. The transaction will also result in the elimination of BKS' annual royalty payments for online textbook sales, which amounted to $6 million in fiscal year 2008."

And what of the apparent conflict of interest? Don't worry: The company established a special committee to evaluate the proposed deal.

Normally a related party deal of this magnitude would sounds all kinds of alarm bells. But because it was already a partner company, it smells less bad. But still: In negotiating the deal, Mr. Riggio's loyalties had to have been divided. The special committee can ensure the fairness of the transaction, but it can't ensure that B&N paid the lowest possible price for the company. At some point Mr. Riggio was torn between his duties to B&N shareholders and his status as the owner of B&N College Booksellers. This is why related-party transactions are generally seen as something to be avoided.

"Last spring, CEO Leonard Riggio of Barnes & Noble (NYSE: BKS) purchased almost $50 million-worth of his company's stock between $27-29.50; today, it languishes on the remainder table at $17.56," says Mark Skousen.

In his income-oriented speciality service, High Income Alert, the advisor says, "Now, a billionaire has also taken a stake." Here's the advisor's update.

"Barnes & Noble is a worthy addition to our model portfolio. Trading well below the level that the CEO purchased shares, we consider the stock a bargain.

"Barnes & Noble owns the nation's largest chain of bookstores, with 800 stores in 50 states. It also owns one of the Web's most-visited Web sites, bn.com. Between its stores and Web site, Barnes and Noble sells more than 300 million books a year.

On Thursday, I expressed skepticism about Borders Group Inc.'s (NYSE: BGP) efforts to sell itself in the face of deteriorating fundamentals and a problematic balance sheet.

The New York Times reports on Wall Street speculation over the past year that Borders might sell itself to its larger rival, Barnes & Noble (NYSE: BKS). "A combination of the biggest and second-biggest booksellers has long been believed to be an invitation for regulatory scrutiny."

On a conference call, Barnes & Noble COO Mitchell S. Klipper said that, if approached by Borders, he would "certainly take a good look at the company and put it under review." The company's chairman, Leonard Riggio, told the Wall Street Journal (subscription required), "I think it would be the height of irresponsibility for us not to look at something presented to us. If they want us to take a look, we would be pleased to do so. We also feel we would be obliged to do so."

Well of course they would. Why wouldn't they take a good look at the company? But ultimately, I think that the better-run Barnes & Noble will take one look at Borders and decide it doesn't want anything to do with it. The brick-and-mortar book industry is in serious trouble -- there's no real antidote to competition from lower-cost providers like Amazon.com (NASDAQ: AMZN) and even Wal-Mart (NYSE: WMT). Borders is looking to set up its own e-commerce site, but I can't even imagine what competitive advantage it will have going up against an established rival like Amazon.

Barnes & Noble is faring reasonably well and, given the long-term problems facing the industry, I just can't see any reason for the company to double down on brick-and-mortar book selling, taking on debt to acquire an ailing brand that would need more money to be pumped into it.

Most mergers and acquisitions don't create value, and I doubt that this one would be any exception. Given the strong track record of Barnes & Noble's management, I don't think they'll make that mistake.