The chief executive of the Booksellers Association (BA), Tim Godfray, has said he hopes Connect Books can find a new buyer quickly to avoid a period of uncertainty for the company and its customers.
Godfray was speaking after Connect Books’ private equity buyer, the Munich-based Aurelius, pulled out of the £11.6m deal on Sunday (21st January), claiming it could see “no way of financing this transaction”.
Connect Books is a wholesaler and distributor run by m.d. Justin Adams and used by many bookshops in the UK and Ireland.
Godfray said: “Inevitably, not having now a clear buyer will create uncertainty. We very much hope that this period of uncertainty will be brief, and we wish Justin Adams and his team the very best of luck in securing quickly a new owner.”
Richard Drake, of Drake – The Bookshop, in Stockton, said the uncertainty surrounding the sale of Connect Books was adding to a feeling of instability in the market, especially with Waterstones up for sale too.
"The overriding issue for the little people down this end is this state of flux,” he said. “This state of imbalance and not knowing what will happen. It is a bigger picture thing. With Bertrams still existing it means people still have choice and a small amount of power in how they go about working. We need two wholesalers. With Waterstones also up for sale, it makes things feel more unstable.”
However Marie Moser, owner of the Edinburgh Bookshop, said she was not "too concerned" by the development.
"Logically as one of the two major suppliers in the industry [Connect Books] is an attractive business, so I would hope they’d be able to find another buyer," she said. "We’d all prefer a world with two big wholesales, if not three."
Adams has told The Bookseller he expects discussions to continue up until the end of the month when the company will decide “what the appropriate next step is”.
The Connect Group indicated in a statement yesterday (Monday 22nd January) it might pursue “legal redress” against Aurelius, which was legally bound to the agreement as long as the German Federal Cartel Office gave its approval to the deal, which it did last week..
Adams said talks between the Connect Group and Aurelius broke down towards the end of last week, but Aurelius’ move to back out was “unexpected”.
“Unfortunately at the end of last week, the parties hit an impasse and yesterday afternoon Aurelius formally informed Connect Group that they were unable to complete the proposed acquisition of Connect Books and finance the acquisition at the agreed terms,” Adams said. “This in turn required Connect Group to make a formal announcement. Connect is in discussion with Aurelius and seeking to clarify their position. Whilst these processes are always unpredictable this latest development was obviously unexpected.”
He added that in the meantime it was “business as usual” for staff and customers and Connect Books remained part of Connect Group PLC. “(We) continue to work to meet our customers and publishers needs and requirements,” he said.
Shares at the Connect Group plunged by nearly a third following the news and after it slashed its profit expectations from £49m to between £45 and £42m.
Aurelius has declined to comment.
Connect Books, which includes wholesaler Bertrams, Dawson Books academic library supply arm and e-commerce retailer Wordery, was put up for sale in October with a price tag of £15m after Connect Group decided to concentrate on becoming a specialist logistics business.
Aurelius, a "pan-European" investor, with offices in Munich, London, Stockholm and Madrid, and listed on the Munich stock exchange, agreed to buy the company in December for "up to" £11.6m, which included an expected deferred consideration of £1.05m.