Borders and Barnes & Noble Shares Up on Merger Talk

There seems little doubt that Borders and Barnes & Noble, were they to merge, would create significant cost savings.

Barnes and Nobles
Barnes and Nobles

And there is no doubt that Borders ,

with a $90 million market value and a highly uncertain future, could use any help it can get in buying a company ten times it’s size (and that’s without a premium).

Monday’s news that it’s largest shareholder, hedge fund manager Bill Ackman, would finance a potential bid for Barnes & Noble has those shares and shares of Borders up sharply.

Barnes & Noble is in the process of running an auction for its sale. The ranks of potential buyers are dominated by private equity firms, which have signed confidentiality agreements (CA) allowing them to receive presentations from management.

Borders, while it has expressed interest in merging with Barnes & Noble, has not signed a CA, perhaps because in doing so it would have to agree to some sort of standstill preventing it from going hostile.

Ron Burkle, the investor who owns roughly 20 percent of Barnes & Noble and waged a losing battle for board seats, has also not signed a CA, perhaps for the same reason.

Finally, Leonard Riggio, the chairman of Barnes & Noble, who owns nearly 30 percent of the stock, has agreed to sit on the sidelines of the sale process for now. There is little doubt that he will be a driving force behind whatever deal will be done—if there is one.

Nothing is expected to be done until early next year, giving prospective buyers a chance to check out how the holiday season treated the retailer.


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