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Borders explores sale, suspends dividend

Old 03-20-08, 11:59 AM
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Borders explores sale, suspends dividend

http://news.yahoo.com/s/nm/20080320/...YEUl9sdHADMQ--

By Yinka Adegoke
1 hour, 12 minutes ago

NEW YORK (Reuters) - Book retailer Borders Group Inc (BGP.N) on Thursday suspended its quarterly dividend and said it was reviewing strategic options, including the sale of some or all of its businesses, and its shares sank more than 30 percent to a new year low.

The company said its largest shareholder, Pershing Square Capital Management, had agreed to loan it $42.5 million and will receive options to buy a 19.99 percent stake in the company at $7 a share. Without the funding, the company may have faced liquidity issues, it said.

"Borders effectively announced this morning that they are out of cash and took a stopgap funding" from Pershing, Credit Suisse analyst Gary Balter said in a research note.

"We see little opportunity in the near term for Borders to be sold, with the No. 1 candidate Barnes & Noble not likely to pursue a deal," possibly at any price before a Chapter 11 filing, he added.

For its part, industry leader Barnes & Noble (BKS.N) said it had not been approached by Borders investment bankers regarding a purchase but would take a look and review a possible sale if it was contacted.

Borders said Pershing Square offered to purchase some of its businesses in Australia, New Zealand, Singapore and the United Kingdom for $125 million.

Borders has the right, but not the obligation, to require the hedge fund to buy those assets under the backstop purchase offer.

Borders shares had risen as much as 20 percent before the bell but reversed course and sank more than 33 percent in morning trading to a new low. Barnes & Noble, which reported better-than-expected earnings and raised its dividend on Thursday, was up more than 6 percent.

"This will be a challenging year for retailers due to continued uncertainty in the economic environment," Borders Chief Executive George Jones said in a statement. "Looking forward to 2008 and beyond, the company determined that additional capital was required to execute our operating plan."

Without the funding, Borders may have faced liquidity issues in the next few months, Jones said. Borders said it was suspending the dividend to preserve capital for operations and strategic initiatives.

Borders said it had appointed JPMorgan Securities (JPM.N) and Merrill Lynch & Co (MER.N) as financial advisers.

Borders reported net profit of $64.7 million, or $1.10 a share, for the fourth quarter ended on February 2, compared with a year-earlier loss of $73.6 million, or $1.25 per share, that included large charges for closing Waldenbooks stores.

Excluding nonoperating charges and discontinued operations, earnings were $1.44 a share.

Analysts on average expected $1.42 per share, according to Reuters Estimates.

Revenue fell to $1.35 billion from $1.37 billion, but Borders said sales were up 2.8 percent after excluding the impact of an extra week in the year-earlier period.

Jones said that although the company was on track to reach its financial targets, worsening economic conditions would slow its progress.

At Barnes & Noble, net income came to $115 million, or $1.79 a diluted share, for the fiscal fourth-quarter ended February 2, down 9 percent from $126.7 million, or $1.83 a share, a year earlier.

Excluding benefits from property insurance and litigation settlements, earnings were $1.69 a share, compared with the $1.70 analysts expected, according to Reuters Estimates.

Consolidated sales at Barnes & Noble fell about 2 percent to $1.85 billion from the year earlier, which included an extra week.

Barnes & Noble said its board raised its quarterly dividend to 25 cents a share from 15 cents a share, beginning with the June payout.

Borders began a turnaround plan last year. It is closing underperforming Waldenbooks stores, weighing options for its international units, and refocusing on its core U.S. store operations.

The retailer is trying to fend off competition not only from Barnes & Noble, but also from online retailers, where consumers have been turning for cheaper books, CDs and DVDs.

Borders shares were down $2.39 or 33.8 percent, to $4.70 in morning trading on the New York Stock Exchange, while Barnes & Noble was up $1.85, or 6.6 percent, to $29.85.

(Additional reporting by Karen Jacobs in Atlanta, editing by Dave Zimmerman)

I haven't read a book since the 1970's. Runs out of thread!

Chris
Old 03-20-08, 01:29 PM
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It's not surprising news. I've mentioned it before that Borders sucks. At least all the Borders stores I've been to. The selection is just terrible compared to B&N. Sure, I love the 30% off coupons they send me every week, but I rarely get to use them becasue the books I'm interested in are never in stock.
Old 03-20-08, 01:57 PM
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^^That being said, if you're a genre collector, Borders beats B&N. I'm always amazed by the GREAT mystery and horror selections when I go into a Borders. Entire rows of mystery harcovers, whereas B&N carries a sparse little collection of the latest titles. Borders also seems to hang on to books longer.
Old 03-20-08, 02:58 PM
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I always thought Borders was better than B&N, especially at non-books stuff.
Old 03-20-08, 03:15 PM
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I'll miss the receiptless returns.
Old 03-20-08, 05:31 PM
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I really like having a Borders in my little town and have always preferred Borders to Barnes and Noble in most categories. B&N would beat Borders in the theology or philosophy section - but everything else Borders seemed to have more variety.
Old 03-20-08, 06:13 PM
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Originally Posted by bishop2knight
It's not surprising news. I've mentioned it before that Borders sucks. At least all the Borders stores I've been to. The selection is just terrible compared to B&N. Sure, I love the 30% off coupons they send me every week, but I rarely get to use them becasue the books I'm interested in are never in stock.
Must depend where you live.The Borders stores in Michigan carry a better selection than the B & N here who rarely carry small press books.
Old 03-20-08, 06:14 PM
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Originally Posted by mrpayroll
http://news.yahoo.com/s/nm/20080320/...YEUl9sdHADMQ--




I haven't read a book since the 1970's. Runs out of thread!

Chris
Love people who are not embarrassed to flaunt their ignorance.

Last edited by Lastyear; 03-20-08 at 08:14 PM. Reason: wrong word
Old 03-20-08, 06:17 PM
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Originally Posted by Lastyear
Love people are are not embarrassed to flaunt their ignorance.
Oh I read a lot, but just not books. I'm not into fiction and there's enough non fiction in the news these days.

Chris
Old 03-21-08, 12:13 AM
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I hope Borders doesn't go out of business. I can't tell you how many times I have been able to find a DVD there when I couldn't find it anywhere else (B&M-wise). They have a damn good selection of Criterions, too.
Old 03-21-08, 02:03 AM
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We don't have a Borders around here, but we have a Waldenbooks and it's not very good. It's a small store and they only carry new releases and recent paperbacks mostly plus a ton of manga. Hastings and Books-a-million are better places to get books in my town.
Old 03-21-08, 02:45 AM
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I sure won't miss Borders' dickish employees and price switching shenanigans.
Old 03-25-08, 10:28 PM
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I have to agree with the pro-Borders crowd. Every Borders I've been into has been better than most B&N stores, and those are stores in OH, AZ and CA.

Bummer.
Old 03-26-08, 12:54 AM
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There's been some talk about Indigo, a large Canadian book company, taking over Borders.

All your books are belong us, eh?
Old 03-26-08, 01:31 AM
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Originally Posted by FunkDaddy J
^^That being said, if you're a genre collector, Borders beats B&N. I'm always amazed by the GREAT mystery and horror selections when I go into a Borders. Entire rows of mystery harcovers, whereas B&N carries a sparse little collection of the latest titles. Borders also seems to hang on to books longer.

Totally. I love how you can go right the Horror section at Borders. You have to do a bit of searching in B&N's
Old 03-26-08, 10:30 AM
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Originally Posted by Shazam
There's been some talk about Indigo, a large Canadian book company, taking over Borders.

All your books are belong us, eh?
Indigo has a neat history. Chapters was Canada's largest big-box bookstore chain, and Indigo a smaller competitor. After several attempts, the owner of Indigo bought Chapters and merged the two.

Before and after, the two stores were similar in ambiance and style - I like both. They have large stores, great selections and generally friendly staff. Indigo/Chapters also has a decent online presence - not quite as good as Amazon, but not bad given Canada's smaller market.

Borders sounds like a poorly-run version of Chapters - good selection etc - perhaps their problems are in management rather than the stores themselves? In any case, you could do far worse than having a Chapters or Indigo store serving your book-reading needs.

edit - Borders investors may feel differently - Indigo has never paid a dividend (last time I checked) as it is still focused on growth instead of steady-state operations.
Old 05-21-08, 10:59 AM
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Link

Borders shares rise on report of possible bid

By Andria Cheng, MarketWatch

Last update: 11:35 a.m. EDT May 21, 2008

NEW YORK (MarketWatch) -- Shares of bookstore operator Borders Group Inc. jumped 14% Wednesday on a report in The Wall Street Journal that its larger rival Barnes & Noble Inc. is studying a possible bid.

Barnes & Noble (BKS:Barnes & Noble, Inc BKS 30.51, +0.56, +1.9%) has assembled a team of executives and advisers to look into whether it should buy No. 2 U.S. book chain Borders (BGP:Borders Group, Inc BGP 7.15, +0.80, +12.6%) , the Journal reported, citing a person familiar with the situation. Thirty people have either signed confidentiality agreements or are in discussions to sign such agreements, the paper said.

Barnes & Noble spokeswoman Carolyn Brown didn't immediately respond to a message, and Borders spokeswoman Anne Roman declined to comment.
Borders shares rose 14% to $7.22 in late morning trading. Barnes & Noble shares tacked on 1.5% to $30.40.

If Barnes & Noble does bid for Borders, it's not clear whether antitrust authorities would clear any deal, the paper said. Barnes & Noble has about 20% to 22% of the retail book market, while Borders has about 10% to 12% and Web retailer Amazon.com Inc. (AMZN:Amazon.com, Inc AMZN 79.35, -1.37, -1.7%) has about 15%, according to Albert Greco, a professor at the Fordham Graduate School of Business, who was cited in the article.

Both Barnes & Noble and Borders have faced increased competition from online retailers like Amazon.com, while overall book sales haven't shown much growth, analysts have said. A combination between the two book giants could yield cost savings and bolster sales and profit, though the close physical proximity of some of the competing stores may pose a challenge.

"We continue to believe that Barnes & Noble is better off waiting for a lower price, ideally in their case after a Chapter 11 filing should that come to fruition, as that would allow them to pick and choose the stores they want" from Borders, said Credit Suisse analyst Gary Balter. "Combining now, brings with it many expensive overlapping leases to dispose of, at a time when developers will likely not welcome getting their stores back."

Barnes & Noble, which also owns mall-based B. Dalton bookstores, also can wait for Borders' situation to "deteriorate" as the backdrop of the consumer-spending slowdown may further derail a Borders' turnaround, the analyst said. Borders posted a 2007 loss of $157.4 million, or $2.68 a share, after its adjusted profit tumbled 72% to $9.2 million.

Borders, owned in part by activist investor Bill Ackman's Pershing Square Capital Management, said in March that it would review alternatives for its business, including a possible sale of the company. The company also suspended its dividend after saying the difficult credit markets rendered some financing alternatives unavailable. In April, the book retailer said it reached a more favorable financing arrangement with Pershing Square. It also said it entered talks with several parties about alternative financing proposals.
Pershing owned 6.54 million Borders' shares as of March, making it the book retailer's largest shareholder with a 12% stake in shares outstanding, according to FactSet.

Andria Cheng is a MarketWatch reporter based in New York.
Chris

Last edited by mrpayroll; 05-21-08 at 11:01 AM.
Old 05-21-08, 02:20 PM
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Originally Posted by FunkDaddy J
^^That being said, if you're a genre collector, Borders beats B&N. I'm always amazed by the GREAT mystery and horror selections when I go into a Borders. Entire rows of mystery harcovers, whereas B&N carries a sparse little collection of the latest titles. Borders also seems to hang on to books longer.
In general agreement here.

B&N is, in my experience, the better "general" bookstore that covers things like history, philosophy, classics, etc.

Borders seems to have more niche books -- a better selection of science fiction and horror, more left-field subjects, more alternative fiction, and a better magazine selection.

I'd hate to see either chain go away or change drastically to resemble the other.
Old 05-22-08, 07:05 PM
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Both of the Waldenbooks here closed some years back, leaving only B&N. IMO their business plan was flawed once you could get discounted books from Amazon.com and the like. The days of full MSRP on almost every book in the store are over and Borders seemed unable to stray from that formula. At least B&N has a running discount for new release bestsellers and the like and a small discount on a lot of other books.

I still buy new hardcovers - less than I used to, down to about a half-dozen new books a year), but they're all Amazon.com, or lately B&N.com w/ coupons.

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