On Thursday, I expressed skepticism about Borders Group Inc.'s (NYSE: BGP) efforts to sell itself in the face of deteriorating fundamentals and a problematic balance sheet.
The New York Times reports on Wall Street speculation over the past year that Borders might sell itself to its larger rival, Barnes & Noble (NYSE: BKS). "A combination of the biggest and second-biggest booksellers has long been believed to be an invitation for regulatory scrutiny."
On a conference call, Barnes & Noble COO Mitchell S. Klipper said that, if approached by Borders, he would "certainly take a good look at the company and put it under review." The company's chairman, Leonard Riggio, told the Wall Street Journal (subscription required), "I think it would be the height of irresponsibility for us not to look at something presented to us. If they want us to take a look, we would be pleased to do so. We also feel we would be obliged to do so."
Well of course they would. Why wouldn't they take a good look at the company? But ultimately, I think that the better-run Barnes & Noble will take one look at Borders and decide it doesn't want anything to do with it. The brick-and-mortar book industry is in serious trouble -- there's no real antidote to competition from lower-cost providers like Amazon.com (NASDAQ: AMZN) and even Wal-Mart (NYSE: WMT). Borders is looking to set up its own e-commerce site, but I can't even imagine what competitive advantage it will have going up against an established rival like Amazon.
Barnes & Noble is faring reasonably well and, given the long-term problems facing the industry, I just can't see any reason for the company to double down on brick-and-mortar book selling, taking on debt to acquire an ailing brand that would need more money to be pumped into it.
Most mergers and acquisitions don't create value, and I doubt that this one would be any exception. Given the strong track record of Barnes & Noble's management, I don't think they'll make that mistake.
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Reader Comments (Page 1 of 1)
3-23-2008 @ 12:33AM
seville said...
Say what? Borders had its own e-commerce
site years ago and folded it into BN.com.
Borders became a public library...
People read books in comfortable chairs
while drinking and eating, then left a
dirty pile of books and magazines without
buying a thing.
3-23-2008 @ 8:47AM
Michael Schneider said...
About a year ago, Borders was considered a likely takeover candidate by private equity firms ( see, green label toward center of page "7 Ripe Retail Stocks at http://www.Barrelomoney.com). That they are hoping to sell themselves now shows how that game has changed.
Borders does have some things that Barnes & Noble would like. They have prime real estate in places Barnes & Noble isn't located including a big store on Chicago's Michigan Avenue downtown and they are in many cities that do not have a Barnes & Noble store. Their Border's Rewards program probably has hundreds of members that are not signed up for Barnes & Noble's reader's advantage. And Borders is stronger internationally than Barnes & Noble. One drawback is that Borders is more into music retailing which may be a big negative in this day and age.
On the net, Barnes & Noble has a business with a competitive advantage over Amazon. I affiliate with Barnes & Noble and I ordered a book for my niece this Christmas through one of my Web sites. It was shipped on time but the book was damaged. All I had to do was exchange it at a Barnes & Noble-- any Barnes and Noble's store in the country. In the Christmas rush, I just stopped at a Barnes & Noble's store near where my brother lives and had no trouble getting a new copy which they even gift wrapped for free. You can't get that from Amazon. (It would be a surprise if Amazon was interested in Borders but not a total shock either). If Barnes & Noble bought Border's they would be able to reach more people on the net just because they would have the expanded store locations and the rewards memberships to draw on for advertising. In the end though, I agree that it probably won't happen because of the debt levels and the economic uncertainty at this point in time.
3-24-2008 @ 2:51AM
Kent said...
The only reason or rationale that B&N might have in acquiring Borders is similar to Supermarket chains acquiring each other : leveraging their increased buying power against book and media publishers to reduce their prices, thereby increasing their margins. That was my immediate thought.
3-24-2008 @ 7:11PM
JL said...
Barnes and Noble's Membership Card > Borders
3-24-2008 @ 7:15PM
Bookseller said...
Borders owns Amazon.com and Barnes & Noble owns BN.com. Borders did not launch its site and fold it into bn.com.
5-22-2008 @ 9:30AM
Kent said...
Bookseller, Borders does not own Amazon.com. They have had an arrangement with Amazon for their web presence, which is now being changed.
http://www.bizreport.com/2007/03/borders_books_breaks_from_amazoncom.html
Amazon has some great features on their web site, so it will be tough to compete. On the web, price is critical, and location is the same for all.
As for bookstores being a library, maybe someone should try a membership approach, and give nice discounts and more chairs. In some B&N stores they have eliminated the comfy chairs because too many non-customers were hanging out and even sleeping.