Borders Poised to Buy B&N

[lilac_jive]

I'm still a huge fan of Borders (I worked for both companies) and going in to a Borders is a way better experience for me than B&N. I can never find anything to read at B&N, but I always walk out with a ton of books from Borders. The staff is always friendly and are huge readers (but I agree with a previous comment that upper management was bad at least a decade ago at Borders, but the new CEO may have shaken things up since).

That being said, I am not in favor of the two merging. I just want Borders to do better in the marketplace.

[DMcCunney]

Originally Posted by murraypaul

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.

Possible, though I can think of some issues with trying to do that. Stores in places like malls don't normally own the land they sit on. The mall owner does, and the retailers lease space. They'll certainly look to close under performing stores, leaving the mall trying to find a replacement. What they do in locations they decide to retain will be an interesting question.

But ultimately, I don't think the hedge fund is interested in any long term strategy or ownership. They want to buy low and sell high, and their efforts will be short term things aimed at producing a high to sell at. The question is whether whatever management is installed as part of the process will be able to maintain the higher stock price. The hedge fund won't care at they point. They got theirs and cashed out, which is what hedge funds do.
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Dennis

[Rebo]

I am not a financial analyst but I do not think this is a good proposition for B&N which is in a much stronger financial condition than Borders. Combining the two will increase their total liabilities and weaken the stronger of the two. Brick and Mortar stores are losing to the internet competition mainly due to the financial burden that comes with the inventories, staff and leased store fronts. To fight for a chance to survive, closing of the physical book stores except in the key strategic locations will be inevitable. In my opinion, even though it has been a year, B&N has been coming out on top of Borders in the ebook industry with the introduction of the Nooks and various nook apps. The B&N stores that I’ve been going to are always jam packed while the Borders stores are lacking in traffic. Borders is on the verge of bankruptcy and its stock is at a dismal $1.47 while B&N is at $15.3. A company like Borders can’t become this dismal if the management is semi-descent. It seems unbelievable for people in Main Street to understand how can the weak and the broke can come up with funding to buy out the stronger rival. It is to the best interest of B&N to just wait for Borders to go bankrupt and then pick up some of the company’s assets at a discounted price.

[SlowRain]

In this situation, I'd rather see the two of them combine rather than both of them go under. Hopefully, they can make a go of it. We need more competition to Amazon. From what I've seen, B&N seems to be more open. I like openness.

[Andrew H.]

A merger would make sense, and would probably result in a lot of stores closing. At least in places where there are two stores close together (which is a lot of places). I'm not thrilled by bookstores closing, but closing bookstores is the reason the merger makes sense. Although competition from Amazon is a big problem for Border and B&N, a lot of their problems are self made and independent of Amazon. In the 90's, both of these companies expanded massively, building one or two superstores in areas that previously had only mall chains (such as Waldenbooks). Articles on publishing at this time were filled with concern about how these stores would destroy the independent bookstore (which was largely mythical for most people anyway). But it's pretty clear that this expansion was reckless...and put both companies in a vulnerable position when Amazon came along. So closing stores that compete directly with each other - and having a unified distribution center - is probably their best hope.

[jhempel24]

I really like the B&N stores aound here, but the people are much nicer at Borders. more Borders stores have closed though, which kind of stinks. Maybe seeing the Borders rewards plus catd was a sign if the merger but keeping the two brands separate? Kind of a test case to see what would happen?

[Fbone]

CNBC is reporting several private equity firms are interested in B&N. They signed confidentiality agreements so we don't know who they are but there may be serious offers starting next year.
http://www.cnbc.com/id/40530696

[J. Strnad]

Sounds like Chrysler buying GM to me.

But since every investment I've ever made has gone south, that's probably a good thing.

[SensualPoet]

The intention is to operate the businesses for longer-term profit and stock appreciation; this isn't about a quick sell. The hedge fund, which owns 41% of Borders if they exercise their warrants (and 37% if they don't), is willing to make an all cash offer for B&N. That puts Burkle out of the picture but leaves room for the Riggio family to stay in. Burkle has no interest in the book business; the Borders crew do.

Borders has international connections; B&N does not and has expressed zero interest in expansion. Borders is a minority holder in Kobo which is very much interested in, and actively playing in, non-US waters. Combining B&N with Borders: taking the best of the retail locations; breathing new life into the textbook college business; merging back-end and web businesses; leveraging warehouse and returns mechanisms; diversifying merchandise (ie not just books); finding synergies between the Nook and the Kobo, its customers and its markets around the world ... it's not all crazy talk.

But again: wait till Borders financials are reported Thursday and let's see what other details of the offer emerge.

[xroads]

I Love books, bookstores and libraries. I can sit in a Barnes and Noble for hours on end. I have sat in B&N for hours on end. There is a special ambiance being surrounded by books and people who enjoy books. In my job as a long haul trucker I often have to lay-over in a city for a day or two while waiting for a new load. When I do I always look for a mall that has a B&N and room enough to park my rig. I've spent many hours at B&N all over the USA. I will miss them greatly if they go away. But with or without the Borders buyout I'm sure the number of bookstores will drop dramatically because of the ereader revolution.

[Xanthe]

The way they've pruned the Borders and disappeared the Waldenbooks around here, the spacing between B&N and Borders stores is pretty good, from a sales POV

I'm surprised though, that Borders would eat B&N, I thought it would go the other way, just comparing the walk-in traffic in my area, and the better pricing B&N has online. (Not to mention the fact that the B&N website actually works well while the Borders website always seems to have one glitch or another.

[tubemonkey]

In the Age of Online, I don't need a physical store. I have a Nook Color and I've never set foot inside a B&N; and never intend to.

[DMcCunney]

Originally Posted by Xanthe

I'm surprised though, that Borders would eat B]&N, I thought it would go the other way, just comparing the walk-in traffic in my area, and the better pricing B&N has online. (Not to mention the fact that the B&N website actually works well while the Borders website always seems to have one glitch or another.

The trick in who eats who is the money. Acquisitions cost enormous amounts, and must be financed. The financing normally comes from outside lenders.

There were rumors months back that B&N might try for Borders, but the question was where B&N would get the money. Neither company is in good shape, and lenders would not be enthusiastic. When they make loans they like to be repaid, and they would see a significant risk the combined company might go belly up and default.

In this case. Borders has a major hedge fund as an investor who could help come up with the money. If it happens, the hedge fund will want to combine the companies, drop redundant operations and employees, fold under performing stores, and try to make a smaller, leaner company, better suited to survive. Their incentive will be to boost the stock price of the combined entity, then sell their holdings at a substantial profit. Folks like hedge funds are in it for short term gains, and are unlikely to be long-term owners.

The first question, assuming this goes off, is whether theycan boost the stock price and sell at a profit. The second is whether, once they've done so, the newly merged company can be competitive. I wouldn't place any large bets on either of those outcomes, though the hedge fund is obviously willing to make a billion dollar bet on the first.
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Dennis

[DMcCunney]

Originally Posted by tubemonkey

In the Age of Online, I don't need a physical store. I have a Nook Color and I've never set foot inside a B&N; and never intend to.

If everything you want to read is available as an ebook, that's a valid strategy. But there are whole classes of books that aren't good fits for ebooks. For instance, I'm a former designer and print production guy. I have a number of volumes on design, typography, art, and photography. These are large format books, requiring true color reproduction. There is no way they would work on an eInk based reader, because those don't support color, and even on a reader like the nook color that does, the screen simply isn't big enough. (In some cases, the 26" monitor attached to my desktop wouldn't be big enough.)

I have a B&N superstore in walking distance of me where I can get such things, and do find it worth setting foot in.
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Dennis

[tubemonkey]

Originally Posted by DMcCunney

If everything you want to read is available as an ebook, that's a valid strategy. But there are whole classes of books that aren't good fits for ebooks.

Most of what I read is; and if it isn't, I can find the info online.

The internet is the best library in the world.