Borders Should Buy Barnes & Noble, Poll Says
NEW YORK (
) --
Borders
(BGP)
should buy
Barnes & Noble
(BKS) - Get Report
, according to
TheStreet
readers.
According to last week's poll, 60% believe a merger between the behemoth booksellers is a good idea, while 40% don't think the union makes sense.
This question was raised after earlier last week hedge fund manager William Ackman said in a filing that his firm
Pershing Square Capital Management
is prepared to fund an offer for Borders to buy Barnes & Noble for $16 a share. The deal would value $963.2 million.
Ackman holds a 37% stake in Borders.
Borders management said it supported such a plan. "We can confirm that Mr. Ackman has shared with Borders his perspective that a business combination of Borders and Barnes & Noble could create significant synergies. We can also confirm that Mr. Ackman has expressed his willingness to provide financing for such a transaction, and we welcome his participation. We have previously expressed to Barnes & Noble our interest in such a business combination, and we look forward to continuing those discussions," Borders said.
While shares of both Barnes & Noble and Borders surged after the announcement, as investors welcomed the deal with open arms, this plan seems less likely after Borders disappointing earnings report.
This past Thursday, Borders reported that its third-quarter loss nearly doubled and warned that it is seeking new lending and is considering the sale of some assets.
Borders is currently in "detailed discussions" with potential lenders, after its borrowing capacity under its revolving credit was lowered following a reduction in the estimated liquidation of its inventory. "If the steps that we are taking are not successful, we could be in violation of the terms of our credit agreements in the first quarter of calendar 2011, which could result in a liquidity shortfall," the company said in a statement.
During the quarter, Borders lost $74.4 million, or $1.03 a share, compared with a loss of $37.7 million, or 63 cents, in the year-ago period.
Revenue toppled 18% to $470.9 million, while same-store sales dropped 12.6%.
Following the report, Borders gave back its earlier gains. Shares hit $1.39 last Monday, but closed on Friday at $1.20. But this was still an 11% gain over the prior week.
Barnes & Noble rallied nearly 18% to end last week at $15.08.
Barnes & Noble reported its third consecutive quarterly loss last month as it invests heavily in its Nook e-reader. The company put itself up for sale this summer, saying it is considering strategic alternatives for the company.
Since the announcement, speculation over potential bidders has run rampant, with the spotlight flashing on private-equity players, chairman and shareholder Leonard Riggio and investor Ron Burkle. Fears have also grown in certain quarters that Barnes & Noble may not be able to find a buyer, raising a red flag for the entire book industry.
--Written by Jeanine Poggi in New York.
>To contact the writer of this article, click here:
Jeanine Poggi
.
>To follow the writer on Twitter, go to
.
>To submit a news tip, send an email to:
.