Nintendo didn't own Rare, they had 49% and MS bought 51% what forced Nintendo to sell their 49%.
I have no idea why they didn't buy them, though.
Nintendo were give first opportunity to buy them too from what I read.
BIggest mistake of their existance in my opinion. So many great franchise that MIcrosoft let die could have been coming out on GCN, Wii and Wii U.
Sure Microsoft brought some of it back this gen, but let's face it woudl they have if the xbox one was doing better? They trying to play at the Nintendo faithful to buy and xbox one over a PS4 with that one trick pony.