Barnes and Noble not buying Borders Books
The Wall Street Journal, citing unnamed people familiar with the situation, is reporting that Barnes and Noble will not be making a bid to buy Borders Books.
Barnes and Noble’s decision is partly due to some of Borders’ long store leases as well as tight credit markets, which would make it tough to put together enough financing to complete such a deal.
In March, Borders put itself up for sale and disclosed potential liquidity problems. It accepted a more than $42 million loan from one of its largest shareholders. A couple of months later, Barnes & Noble confirmed that it had assembled a senior team to consider a possible acquisition of Borders.
“The process continues and we continue to evaluate alternatives,” Borders spokeswoman Anne Roman said this morning. She declined to comment further.
The Wall Street Journal reported that Borders wants to have any sale of the company done by the end of September.
I’m not particularly surprised by the news even though I thought this might come to fruition. One industry insider told me that Barnes and Noble simply doesn’t pull the trigger on purchases that often. And while that is true, I still thought this represented a clear and simple way to consolidate the brick-and-mortar market and compete against retailers like WalMart and Target.
It seems like Barnes and Noble was interested and considering a purchase. Yet, in the end Barnes and Noble wasn’t willing to take on the additional debt run up by Borders nor be constrained by their long leases. If the economic climate were better, Barnes and Noble may have been more bold, but the economy continues to struggle and inflation looms. Discretionary income is going down and books faces an uphill battle in that type of environment.
Borders is now in a strange position. Their most favored suitor has spurned them and no one else seems a likely candidate. Very few competitors are big enough to take on Borders. And no, Amazon is not a possibility. Not a chance. That leaves a financial suitor, someone who believes they can turn Borders around and turn it into a profit center. This seems like a long shot.
Perhaps Barnes and Noble is waiting for a more catastrophic demise of Borders. One in which Barnes and Noble can simply cherry-pick the stores they want, sticking a proverbial thumbnail in the bottom of the chocolate looking for caramel.
