Borders Agrees To Sell Itself To Private Equity Firm For $215 Million

-- Borders Group Inc. said late Thursday it agreed to sell itself to private investment firm Najafi Cos. for $215 million and is seeking court approval for the agreement.

Najafi Cos., which owns the Book-of-the-Month Club, will also assume $220 million in debt.

The agreement is tentative and is what is known as a "stalking horse" bid for a company under bankruptcy protection. The bid will open an auction for the company and its assets, so a higher bid is possible.

A bankruptcy court hearing on the deal is set for July 21. Borders, the second largest U.S. traditional book store chain, filed a separate motion to liquidate in case the court does not approve an auction.

Najafi Cos. has been a speculative suitor for the Ann Arbor, Mich.-based company, although Borders has not previously confirmed any specific bidders.

Borders filed for bankruptcy protection in February, hurt by stiff competition from online booksellers and discounters.

A sale provides the "best path forward to reposition the business for a successful future and to maximize value for the Company's stakeholders," Borders said in a statement.

Under terms of the deal, Borders will become part of the business unit of Phoenix, Ariz.-based Najafi Cos. that also owns Book-of-the-Month Club, Doubleday Book Clubs and Columbia House.

Najafi Cos. bills itself as the largest private equity firm in Arizona with more than $1.1 billion in assets. It has investments in restaurant chain Pasta Pomodoro as well as the Phoenix Suns basketball team, for which CEO Jahm Najafi serves as vice chairman.

Borders had said previously in bankruptcy court filings it was in discussions with several potential bidders. It has said it hoped to name a bidder by July 1 and sell itself by the end of July.

Borders, which started with a single store in 1971, helped pioneer the book superstore concept along with larger rival Barnes & Noble Inc. It was brought down by heightened competition by discounters and online booksellers, as well as the growth in popularity of electronic books. It currently operates about 400 stores, down from its peak in 2003 of 1,249 Borders and Waldenbooks.

Borders stressed in a statement that its Borders Rewards program, gift cards and other customer programs all continue to operate normally.

If Borders doesn't successfully sell itself as a complete company, it is asking the bankruptcy court that its assets be sold by a joint venture led by liquidation firms Hilco and Gordon Brothers. Borders is also asking the court to let the two companies liquidate any stores Najafi doesn't acquire in its bid for the company.

Borders expects the sale process will be complete by late July.

Comments

[whyus]

09:55 PM on 07/04/2011

Doesn't that seem a paltry sum in today's world? I feel bad that it has closed. It did a lot to revitalize communities. An old bowling alley near us became Borders, and brought people,books, coffee, together. Thanks for being there, Borders.

[Epilef2000]

01:25 AM on 07/04/2011

in my town the quality of books in Border was incredible--especially its history and government sections..compared to B&N who mainly carried Glen Beck and Sara Palin collections.but i sales are more important than quality any day ......

[LeeCalif]

05:03 PM on 07/03/2011

Thanks for the memories, Borders !

[Edward Paul Villaflor]

06:32 AM on 07/03/2011

Brick-and-mortar has become trite. Borders failed to reconfigure itself when the market was shifting, They failed to duck under the desk before the tremors became jolts.

[sadwitness]

10:48 PM on 07/02/2011

Borders Agrees To Sell Itself...since corporations are people now, does that make this decision legal prostitution?

[Manuel Gwiazda]

03:47 PM on 07/02/2011

First victim of kindle ?

[Subtext]

02:43 PM on 07/02/2011

Actually, electronic books is not at all what hurt Borders.
Electronic sharing of music hurt Borders immensely - they had approximately a third of their footprints devoted to CDs.
But they still could've survived if not for the Blu-Ray, HD nonsense in the DVD world. When flat screens became prominent, showing the flaws of normal DVDs, the country waited to see who would win the Blu-Ray/HD battle, and DVD sales plummeted.
Borders couldn't survive losing both their music and the dvd model within a couple years.

If flat screens had been developed to be shaping the image, as our old standard tubes were, and there had been no need for the external blu-ray battle, Borders would still be surviving today.

[Adrian Rodriguez21]

10:11 AM on 07/02/2011

Good riddance to bad rubbish

[heraldi]

05:28 PM on 07/02/2011

Why such a nasty comment? Guess you are not a reader. I don't like that the big stores helped kill the independent ones, but some of them have survived, like in SF, and are doing well. Times change. Accept that.

[riverhouse]

12:14 PM on 07/04/2011

There are adult education classes. Go learn to read. It will be good for you and your child.

[bryanzth]

09:43 AM on 07/02/2011

$215 million??? That's just a spit in the ocean. Border's is dead. Long Live Amazon.

Me, I won't darken the door of Barnes and Noble.

BZ.

[klinzboy]

02:14 PM on 07/02/2011

Thank God for public libraries, eh! Or is that too much like socialism? I get confused.

[bryanzth]

10:45 PM on 07/02/2011

Socialism good, especially democratic socialism (see Sen. Bernie Sanders).

Harsh capitalism, multinationals and laizze faire bad. Very bad.

BZ.

[any mouse]

04:40 AM on 07/02/2011

With the advent of on-demand-printing and ebooks, both of which give authors better control and minimize overhead, the corner book store and the old publishing model are dying quickly.

This is why a friend that published history books shut down her small publishing company. She ran out of places to sell traditional books.

The bottom line is why print a book until the customer buys it?

This is why Createspace (owned by Amazon) and Lulu are so successful. Since the author submits the book as a PDF file, it can either be sold as an on-demand printed book or as a downloaded file. Recently Jon Stewart had on an author that published through CreateSpace, so in the future more and more books will be done this way.

Just about the only place still selling pre-printed books is Walmart and who knows how much longer they will do that.

[dlaroche]

07:00 AM on 07/02/2011

Barnes and Noble is still around. Does print on demand make sense? Yes. But there are times you want to walk into a bookstore to browse and buy a book!

[any mouse]

08:15 PM on 07/03/2011

The problem is fewer and fewer people bother to browse in a book store. This is the same problem libraries have.

This is the reason book stores are going away and libraries are more and more focused on electronic knowledge sources.

Basically you are a minority of the people that buy books and when customers change their buying patterns, companies have to adapt or die.

On-demand printing is much more cost effective than the old model of printing a bunch of books, holding them in a book store for a while then taking back most of them to be recycled. The harsh reality is most of the books that get shipped to book stores gather dust for awhile and then are shipped back to the publisher.

Unless a business can make a decent profit on its investment, it goes away and right now book stores can not make a decent profit due to changes in customer buying.

Is it a shame that book stores are going away? yes. Is it inevitable? yes.

[Epilef2000]

01:22 AM on 07/04/2011

I think the problem in the US (besides the largest cities) is that everything large--Walmart-Borders,-B&N..all the box stores need massive sales to cover their rent alone..but when you travel outside the US, even in developed Europe..you still see these wonderful small entrepreneurial businesses-small books stores..etc. I wish we could bring that old type of entrepreneurship back to the US

[bryanzth]

09:44 AM on 07/02/2011

Createspace and Lulu. How do you get there from Amazon dot com?

BZ.

[any mouse]

08:07 PM on 07/03/2011

No sure what you question is, but both CreateSpace and Lulu have agreements with Amazon so their authors can sell via Amazon.

But customers can also buy directly from Lulu. CreateSpace retails through Amazon or provides a shell for your own web site

https://www.createspace.com/

http://www.lulu.com/

[AZ Stang]

01:14 AM on 07/02/2011

This is all Al Gore's fault for inventing the Internet!

[Gasparilla]

10:37 AM on 07/02/2011

He never claimed that. He claimed that he proposed the bills in Congress that provided the seed money to greatly expand the internet from something mainly used by academics into somthing everyone uses. And that's what he did.

[AZ Stang]

12:01 PM on 07/02/2011

So he was merely an accomplice. Gotcha.

[AZ Stang]

12:04 PM on 07/02/2011

I kow. He claimed he took the intiative in creating the internet. Still funny, though...

[Hope Richardson]

11:14 PM on 07/01/2011

Gaaaaah, Borders is the only bookstore within a 10 mile radius in of my house. Where am I suppose to loiter for hours on end if it closes?

[verticallychallenged]

08:01 PM on 07/03/2011

Your library, perhaps?

[Hope Richardson]

09:02 PM on 07/03/2011

I suppose. You know, assuming it was open more than four days a week, had working computers, or had ordered any books since the 1990's.

[kdlaiusa]

04:09 PM on 07/01/2011

Columbia House still exists?
I have seen too many college students in the 70's joined the club to get albums and cassettes but never paid a dime for them.

[dukeofurl01]

04:08 PM on 07/01/2011

Many people always wanted a world without Borders....

[Hope Richardson]

11:16 PM on 07/01/2011

It's funny cause it's a pun :P

[IdeatoEmpire]

03:48 PM on 07/01/2011

Borders made a critical error when it turned over the online biz to Amazon. They basically gave away their future with that one move.

Interesting that a few years ago we all thought Borders and B & N would kill off the small independent book store. Looks like the small stores will be the ones to survive after all. Funny how that works out.

[Ramon Moreno]

02:47 AM on 07/02/2011

It's happened before. I guess Borders wasn't Wal-Marty enough.