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Originally Posted by SensualPoet
The hedge fund's offer to merge Borders with B&N was bizarre -- but then none of us knows the actual details. I doubt if the fund's interest in Borders has evaporated: the GE Capital deal, too, shows there are levers to pull that seem attractive to new money. (Hands up anyone here willing to toss $1000 into the kitty to buy shares?) But it sure doesn't look pretty and, while the word is over-used in both political and financial circles, desperate does seem to apply. At least for those currently in charge and with current cash invested.
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The only motive I could see for the hedge fund offer was to do what hedge funds do: merge the enterprises, eliminate redundancies, close stores, trim staff, try to firm up the balance sheet, and drive the stock price up to a point where they could cash out at a profit. The longer term health of the merged entity would be another matter, but once out, they wouldn't care.
Border's stock price did rise briefly on the announcement, and I suspect the hedge fund took the opportunity to reduce their holdings while it did, but I couldn't really see the offer as serious - Borders was already on life support, and a worsening of its condition would simply move the idea from "highly unlikely" to "flatly impossible". It's condition worsened, so...
If I were the hedge fund, my interest would be disposing of my holdings in Borders Group with as little additional loss as I could manage. With Borders' stock dropping 36% to .47/share, that won't be easy. Hard to imagine who would take it off their hands, or why.
Bankruptcy will make the required store closings easier, which is probably one major incentive to attempt it.
But yes, I think "desperate" is an applicable term.
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Dennis