The biggest part of this news is not the possible Barnes and Nobel (BKS) bid for Borders (BGP)
Here is the big news, according to the Wall St. Journal,30 people, including strategic buyers and private equity firms, have either signed confidentiality agreements or are in talks to sign agreements so they can look at a bid for Borders.
There are some anti-trust issue with a possible BKS bid. Amazon (AMZN) is the #2 book seller with 15% of the market and a BKS, BGP combo would then have over 30%. Based on recent results (Whole Foods (WFMI) & Wild Oats, XM (XMSR) & Sirius (SIRI)) however, even if the government did object, chances are the merger would still eventually go through anyway.
Just yesterday, Carlye’s David Rubenstein said that, far from being dead, private equity deals in the $2 billion to $4 billion range will take precedence. “We are casting our net wider for $2 billion to $4 billion deals that will require little or no debt” said Rubenstein. He continued, “I think that the bottom has been hit in terms of private-equity investing activity and you’re now beginning to see the upward swing”.
Borders has a current market cap of $350 million and $580 million in debt. A deal that gave shareholders $12 a share would come in at $1.3 billion and change. At this price, the number of buyers who could purchase the chain is plentiful and perhaps the reason for the wide interest.
30 potential buyers will make for a very interesting and competative bidding process and is very good for shareholders.
We bought shares at $5 and change looking for this very possibility, not as a long term permanent holding. While sure this would eventually happen, I thought it was far more likely towards the fall as the Ackman financing and dilution deadline approached.
Either way, gonna be a fun summer with this one.
Disclosure (“none” means no position):Long BGP, none
5 replies on “Barnes & Nobel (BKS) looking at Borders (BGP)”
Nice!
Todd,
How realistic do you think that $12/share is?
if you were ackman and had bought in at $24 and $12, would you sell out for less than $12? being the largest shareholder by far, what he wants to happen most likely will.
Aah! So that’s what the “active”, in Active Investor stands for.
Listen, right now borders biggest problem is its debt due to leveraging up to
fix up stores and losses on the Waldenbooks Stores . Total longterm debt is equal $550Mil. Subtract $125Mil for the sale of the international business, another $105Mil for the warrants that Pershing Square has and $75+Mil expected for the sale of paperchase. Total debt if all happens according to plan will be $245Mil, a 45% reduction in debt.
The good news is that for the trailing 3 years Borders has been facing better sales and has been expanding with the new concept stores but we do need to keep in mind the Sale of paperchase and international stores will carry over to the bottom line. Overall, if management can address the debt problem and reduce operating expenses then the shares will be off to the races either as Borders or as a buy out target by Amazon/Barnes&Noble. They seem competent enough to make either of these two happen.