Tentative sale of Borders is in jeopardy, raising prospect of liquidation
The company that had tentatively agreed to acquire Ann Arbor-based Borders Group Inc. said tonight that it's no longer interested in buying the bookstore chain unless it can proceed under the terms it previously laid out.
The announcement places into doubt the future of the proposed sale of Borders and increases the possibility that the company will be forced to liquidate.
Meanwhile, the Wall Street Journal reported that the deal with Najafi "unraveled."
Najafi said in the statement that "we remain willing, ready and able to move forward should the deciding parties instead choose to work with us and our existing offer."
The troubles with Najafi are believed to be related to objections by some landlords and an objection filed today by a committee of Borders' unsecured creditors, major publishers who argued that Najafi's proposed acquisition would not prevent the company from liquidating Borders' assets and keeping valuable intellectual property for itself.
Najafi, whose Direct Brands owns the Book of the Month Club and other assets, had agreed to a tentative deal to acquire Borders by paying $215.1 million in cash and assuming about $220 million of liabilities.
Borders is set to go before a judge in New York on Thursday to ask for approval of its sale procedures tied to an auction that is scheduled for Tuesday. Najafi was previously named as the "stalking-horse bidder" in that auction — meaning the leading prospective acquirer.
Competing bids are due by Sunday. Borders, as required by its bankruptcy financier, has already lined up a backup bid by a team of liquidators, which would sell off all of Borders' remaining assets if the company fails to find a better offer.
If Borders is to be liquidated, the publishers want the process to be handled by liquidation firms that have already been identified by Borders.
WSJ described Borders as being "on the brink of liquidation."
In its statement tonight, Najafi contended that it had a defined strategy to keep Borders alive.
"From day one, our intention had been to keep Borders intact and to provide the best long-term outcome for Borders’ loyal customers, publishers, employees and the entire book industry," the company said.
A spokeswoman for Borders declined to comment tonight on Najafi's statements.
A liquidation of Borders would affect the company's 11,000 employees, including nearly 400 at the headquarters in Ann Arbor. It would also mean the expeditious closure of its 399 remaining stores, including the flagship store in downtown Ann Arbor.