Borders UK on 'brink of collapse' after rival book seller ends talks
Borders UK doesn't have enough cash to get through the holiday season, according to reports from London that the book store chain is looking for a buyer.
Ann Arbor-based Borders [NYSE: BGP] sold the 45 stores in the UK division to Risk Capital Partners for $20 million in 2007, according to reports. The private equity firm in London was to pay another $20 million to Borders based on future performance and Borders was to retain 17 percent ownership in the UK operations.
Borders posted a $115 million loss on that sale.
In the US, Borders stores are battling online retailers and discounters over price on popular titles as the holiday season looms as a critical time for its future. The chain is the nation's second-largest book seller.
The price wars also are affecting Borders UK.
According to a report from the BBC: "The chain, which also owns Books Etc, has suffered from increased competition from online retailers, such as Amazon, as well as supermarkets.
"'These stores are losing money even in the run up to Christmas because of the heavy discounting,' Nick Hood, from the insolvency practitioners Begbies Traynor, told the BBC.
"'The real problem here is the lack of credit insurance which means they can't get supplies.'"
Borders UK has pursued a sale for much of 2009, according to other business reports, including at least two additional private equity companies.
In the US, Borders announced this month that it would close 200 of its Waldenbooks and trim 1,500 jobs.
Borders stock was selling at $1.94 per share on Friday, giving it a market cap of $116 million.
The company releases its quarterly earnings report on Tuesday.
Comments
CynicA2
Mon, Nov 23, 2009 : 4:29 p.m.
I agree with John Galt on this one... they have been rearranging the deck chairs on the Titanic for several years now - and from what I've heard, they are really grasping at straws, internally. Can't really figure-out why Ackman/Pershing Square hasn't pulled the plug already. This may be their last Xmas, I think.
bruceae
Mon, Nov 23, 2009 : 1:39 p.m.
Borders lost it years ago. I was in the Ann Arbor store 2 years ago looking for a book I found on Amazon. The Borders price was $20.00 higher and after finally finding a clerk and showing her the printed out Amazon price she very arrogantly told me that "they don"t match other's prices". Well, sorry, in this environment where every dollar counts I will always try to support the local business first but they can't be 25% over priced and expect people to support them.
John Galt
Mon, Nov 23, 2009 : 12:46 p.m.
I fear that Borders is one of the companies that will be filing for bankruptcy (n the U.S. as well) soon. Amazon and Barnes & Noble have been out-competing for a while. So, Pfizer and now Borders.... Ann Arbor will be left with the tax-supported University, but big business is slipping away.