The Bookseller.com

12th October 2008

Borders US stock rallies

25.03.08

US Borders Group stock rose yesterday (24th March) after falling to record lows last week after the bookseller said it was putting itself up for sale, reports the Free Press.

Investors drove up shares $2.18, or 43%, to close at $7.25 on the New York Stock Exchange, reported the website, as analysts called fellow us book chain Barnes & Noble the most likely suitor.

Borders announced last Thursday that it had arranged a $42.5 million loan from its largest shareholder Pershing Square Capital Management to help with cash needs this year. Pershing Square also made an offer to buy Borders remaining international business for $125 million.

Bloomberg also reports on the share price rise, quoting a report by Goldman Sachs analyst Matthew Fassler: "We see improved prospects for a deal. Barnes & Noble could generate significant accretion from an acquisition of Borders."

Barnes & Noble may add more than 10 percent to profit if it paid as much as $13 a share for Borders in an all-cash transaction, Fassler said. An all-stock transaction of as much as $10 a share might also add at least 10 percent to profit, he said. "Closing stores and sending a chunk of the volume to surviving nearby stores would drive further accretion," he added.

Meanwhile, bloggers are weighing in on the developments. At BloggingStocks, Zac Bissonnette expresses skepticism about Borders' efforts to sell itself "in the face of deteriorating fundamentals and a problematic balance sheet".

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," writes Bissonette.

"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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