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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.
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Dennis
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