Barnes & Noble Studying Possible Borders Purchase

Posted on May 22, 2008

The Washington Post reports that Barnes & Noble has put together a management team to study the "feasibility" of acquiring Borders.

Speculation had been mounting about a possible Barnes & Noble-Borders combination since Borders announced in March that it was putting itself up for sale and that it had lined up $42.5 million in financing to help it continue operating. At that time, Barnes & Noble said it would take a look at its rival.

Borders is more than a year into a restructuring that includes rolling out the concept of U.S. superstores, as part of an effort to lure more shoppers, and a jump back into online bookselling after seven years paired with Amazon.com. Borders' new Web site is expected be ready to start taking orders soon.

Borders said in a statement Thursday that the company is "in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date."

MLive.com reports that Borders Chief Executive Officer George Jones said the sales process they began in March has been stressful for Borders employees.
After reporting its second straight year of losses topping $150 million, Borders announced in March it would consider selling itself, either in pieces or in its entirety. The company is already actively seeking buyers for its remaining foreign subsidiaries after selling off its United Kingdom business last year.

Borders also lined up $42.5 million in financing to help it continue operations from hedge fund Pershing Square Capital Management LP, its largest shareholder. Richard McGuire, a partner of Pershing Square who was elected to the Borders board of directors Thursday, declined comment.

Jones said he understands this process has been stressful on the company's 30,000 employees, especially the 1,200 who work at the local headquarters. That is why, he said, he hopes to move it along as quickly as possible.

"We are taking steps right now that will make the company healthier," Jones said. "I think people understand that."

So far we don't know who will eventually acquire Borders. We just know that Barnes & Noble is looking into whether or not it would be feasible for them to acquire Borders. In many cities Borders and Barnes & Noble have stores that are fairly close to each other so a merger could result in bookstore closings and layoffs. Barnes & Noble also recently reported earnings - they reported a fiscal first-quarter loss of $2.2 million.