Borders Poised to Buy B&N

[L.J. Sellers]

This was reported in the Wall Street Journal, and it surprised me because I didn't think Borders had the financing. But it makes sense for the two struggling companies to merge...and likely close a lot of stores.

Merging their e-book stores would position them to be more competitive with Amazon.

http://online.wsj.com/article/SB1000...857933776.html

[Kali Yuga]

Article without paywall:

http://www.businessweek.com/news/201...up-on-bid.html

I'm not overwhelmed with optimism here. I expect more Borders and/or B&N stores will close as a result, probably anywhere that has an overlap of the two stores and weakening sales.

However, if it does somehow calm down the war between Riggio and Burkle, that would be a desperately needed upside.

[abookreader]

I'm thinking of the stores in this area and it is mostly a Barnes and Noble and a Borders within less than 1/2 a mile of each other. Obviously there will be store closings in our area.

I wonder how merging their eBook stores would effect the "Powered by Kobo" and would it be the final nail in the coffin of Fictionwise?

[kindlekitten]

here most of the Borders are stand alone shops and B&N are in malls so they may not detract too terribly from each other. I hope they keep the Borders "flavour" though. I always feel like I am going somewhere special when I go into a Borders

[rhadin]

How many more nails does Fictionwise need? I used to buy up to 20 ebooks a month from Fictionwise but that began declining once B&N took over and micropay disappeared. I haven't bought a book -- or even looked at its website -- from Fictionwise in months.

I think the merger of Borders and B&N would be good. Borders has always been very poorly managed (I used to work for its former Waldenbooks division) in comparison to B&N, which has conssitently been a step behind, management-wise, from Amazon.

Ultimately, I think you will see a merger of the Borders, B&N, Sony, and Kobo ebookstores into a single ebookstore that will be able to compete against Amazon. When that merger occurs, I expect to see Kobo's management in charge.

[ppw]

Almost pulled the trigger to short B&N stocks when they announced the Nook Color. My reservation was that the stock might jump crazy if some one decided to buy it. Now if the merger goes through and the new company keeps the Nook Color direction in the e-reader arena, then it might still be a short.

The Nook Color is a nice piece of hardware currently. But it is taking on too big competitions by going LCD against tablets. Within one or two years, the market for dedicated LCD e-readers will not contribute much to a big company's bottom line.

[Dulin's Books]

WaldenBooks was my favorite book store. It was always laid out nicely and the peopel were always friendly

[luqmaninbmore]

Originally Posted by Dulin's Books

WaldenBooks was my favorite book store. It was always laid out nicely and the peopel were always friendly

And then they killed it. Just like they killed my favorite borders (which used to be a Walden) in the Mall across the street from my old place. A merger might be good, but not if Borders management is in charge.

Luqman

[doreenjoy]

They may decide to keep both brands. Time will tell.

[SensualPoet]

It might make sense to keep both brands but merge back-end and supply systems. Clearly, a new model is needed for servicing customers and neither chain has figured that out yet.

I'd also wait till Thu Dec 9 before getting too "het up" about the notion: that's when Border's reports quarterly performance.

Burkle is pretty much out of the picture as far as B&N is concerned; the question is what sort of bath he'd take at $16 a share. The B&N board will have to figure out: which is best? merger or go it alone? Borders does bring some international exposure which is very much needed by B&N if it is serious about the Nook.

Which ever way you slice this, it's the battle of the pipsqueaks.

[phenomshel]

Ouch.. yeah, DeKalb has a Borders directly across the street from a B&N. That's gonna hurt. I've observed already in a previous post how much better B&N here does in regards to marketing vs. our Borders, which is just pathetic.

I have to agree with Luqman... if Borders management is in charge, no matter how advantageous financially a merger might be, they'll manage to kill it.

[Kali Yuga]

Originally Posted by SensualPoet

It might make sense to keep both brands but merge back-end and supply systems.

I have my doubts that the Borders brand is worth all that much. I expect Borders to get folded into B&N.

Originally Posted by SensualPoet

Burkle is pretty much out of the picture as far as B&N is concerned; the question is what sort of bath he'd take at $16 a share.

Ya know, not sure I see it that way. He owns 20% and has not expressed an interest in selling out. Riggio owns 60% so I expect he's planning to sell a chunk. In the meantime, the same shareholder vote that blocks Burkle from buying more shares apparently also blocks the board from issuing shares to give to Riggio.

Re: international business, most of their international stores are gone, including all stores in the UK.

[DMcCunney]

I'm grimly amused, but not optimistic.

I'd heard rumors like this before, but they were B&N acquiring Borders, and they foundered on the question "Where would B&N get the money?" B&N isn't exactly healthy, and Borders is in worse shape. Normal lenders for such efforts wouldn't be very interested. The usual answer to "Can two sick companies make a healthy one?" is No.

The fact that a hedge fund is interested in working with Borders doesn't fill me with enthusiasm. The folks in places like that are numbers guys. The look for assets they think are undervalued, scoop them up, and attempt to make them more valuable, hoping to make a killing selling their holdings bought at distressed prices at much higher prices when the stock rebounds. (Of course, the stock has to rebound for this to work...)

The usual turn around strategy is massive cost cuts: combine back office operations and eliminate redundant staff, close stores seen as under performing with attendant layoffs, and generally try to create a leaner, lower cost operation.

The problem in tis case is that it won't address the underlying structural problems in the industry that put the companies in this position. Sales of printed books have been dropping steadily, and current levels aren't enough to support the existing retail infrastructure. The problem is exacerbated by competition from discount retailers like Walmart, and "warehouse stores" like CostCo and Sam's Club, and breathing down everybody's neck, Amazon.

I really don't see a happy ending here.
______
Dennis

[cfrizz]

This would suck if we ended up with B&N stupid drm scheme. I'm not going to buy a Nook just to be able to transfer the books I already have with the regular ADE drm.

[murraypaul]

Originally Posted by DMcCunney

The fact that a hedge fund is interested in working with Borders doesn't fill me with enthusiasm. The folks in places like that are numbers guys. The look for assets they think are undervalued, scoop them up, and attempt to make them more valuable, hoping to make a killing selling their holdings bought at distressed prices at much higher prices when the stock rebounds. (Of course, the stock has to rebound for this to work...)

The usual turn around strategy is massive cost cuts: combine back office operations and eliminate redundant staff, close stores seen as under performing with attendant layoffs, and generally try to create a leaner, lower cost operation.

The problem in tis case is that it won't address the underlying structural problems in the industry that put the companies in this position. Sales of printed books have been dropping steadily, and current levels aren't enough to support the existing retail infrastructure. The problem is exacerbated by competition from discount retailers like Walmart, and "warehouse stores" like CostCo and Sam's Club, and breathing down everybody's neck, Amazon.

I really don't see a happy ending here.

The really pessimistic view would be that what they are really after is the real estate/store location, and will accelerate the process of selling anything other than books in bookstores.