2008 Woodie Awards
Bookseller Borders explores a sale
Mar. 21, 2008
By Greta Guest - Detroit Free Press
Issue date: 3/20/08 Section: MCT News
"There was not a crisis," Jones said. "So why did we do the loan? Because we don't want to have a crisis. We're not in trouble; we're not in trouble at all."
On a conference call with analysts Thursday, Borders management said it would work with advisers to reduce costs from headquarters to stores. Borders hired J.P. Morgan Securities and Merrill Lynch & Co. to advise it on strategic alternatives such as selling the company or certain divisions.
Besides the loan, Pershing Square, which owns 24.5 percent of Borders shares and has a representative on Borders' board of directors, made an offer to purchase certain parts of the company's international businesses for $125 million. Those businesses include Paperchase and Australia, New Zealand and Singapore subsidiaries. Pershing also has a warrant to buy nearly 20 percent of Borders shares at $7 a share for seven and a half years.
The cash infusion became more urgent after negotiations to sell Borders' Australia and New Zealand division fell apart last week.
For the quarter that ended Feb. 2, Borders reported profit of $64.7 million, or $1.10 a share, compared with a loss of $73.6 million, or $1.22 a share, during the same quarter in 2007.
Revenue dropped 2 percent, to $1.35 billion from $1.37 billion for the quarter. Analysts expected profits of $1.42 a share on sales of $1.37 billion.
The credit crunch made it difficult to arrange conventional financing, said Jones. He said Borders would have run into liquidity trouble without the Pershing Square funding in the next few months.
"Overall, we believe that the 2009 financial targets we set back in March of last year remain attainable, yet within the current economic environment we will be slowed in our progress and expect that we'll reach them later than originally anticipated," Jones said.
Jones is leading the nation's second-largest bookseller in a turnaround effort. This year t he chain is rolling out concept stores that have digital centers for downloading music and books, and it's setting up strategic partnerships with online companies.
For 2007, Borders reported total sales of $3.8 billion, up from $3.6 billion the year before. It had a net loss of $157.4 million for the year, compared to a loss of $151.3 million in 2006.
Sales at stores open at least a year rose 1.5 percent at Borders superstores, 2.2 percent at Waldenbooks and 7.9 percent at Borders international stores.
Borders expects to unveil its new e-commerce site by May 3.
Anderson said that all retailers are feeling the pinch of the slowing economy.
"Borders is suffering because of the overzealous lending to marginal homebuyers," Anderson said. "I think Borders is a fundamentally sound company and has a fundamentally sound business strategy. They are not in danger of going under."
On a conference call with analysts Thursday, Borders management said it would work with advisers to reduce costs from headquarters to stores. Borders hired J.P. Morgan Securities and Merrill Lynch & Co. to advise it on strategic alternatives such as selling the company or certain divisions.
Besides the loan, Pershing Square, which owns 24.5 percent of Borders shares and has a representative on Borders' board of directors, made an offer to purchase certain parts of the company's international businesses for $125 million. Those businesses include Paperchase and Australia, New Zealand and Singapore subsidiaries. Pershing also has a warrant to buy nearly 20 percent of Borders shares at $7 a share for seven and a half years.
The cash infusion became more urgent after negotiations to sell Borders' Australia and New Zealand division fell apart last week.
For the quarter that ended Feb. 2, Borders reported profit of $64.7 million, or $1.10 a share, compared with a loss of $73.6 million, or $1.22 a share, during the same quarter in 2007.
Revenue dropped 2 percent, to $1.35 billion from $1.37 billion for the quarter. Analysts expected profits of $1.42 a share on sales of $1.37 billion.
The credit crunch made it difficult to arrange conventional financing, said Jones. He said Borders would have run into liquidity trouble without the Pershing Square funding in the next few months.
"Overall, we believe that the 2009 financial targets we set back in March of last year remain attainable, yet within the current economic environment we will be slowed in our progress and expect that we'll reach them later than originally anticipated," Jones said.
Jones is leading the nation's second-largest bookseller in a turnaround effort. This year t he chain is rolling out concept stores that have digital centers for downloading music and books, and it's setting up strategic partnerships with online companies.
For 2007, Borders reported total sales of $3.8 billion, up from $3.6 billion the year before. It had a net loss of $157.4 million for the year, compared to a loss of $151.3 million in 2006.
Sales at stores open at least a year rose 1.5 percent at Borders superstores, 2.2 percent at Waldenbooks and 7.9 percent at Borders international stores.
Borders expects to unveil its new e-commerce site by May 3.
Anderson said that all retailers are feeling the pinch of the slowing economy.
"Borders is suffering because of the overzealous lending to marginal homebuyers," Anderson said. "I think Borders is a fundamentally sound company and has a fundamentally sound business strategy. They are not in danger of going under."
Be the first to comment on this story