2008 Woodie Awards
Mar. 21, 2008
By Greta Guest - Detroit Free Press
Issue date: 3/20/08 Section: MCT News
DETROIT _ Borders Group Inc. put itself up for sale Thursday, after years of speculation that it would merge with the nation's largest bookseller, Barnes & Noble.
While industry analysts said New York-based Barnes & Noble will be a likely suitor for Borders, the Ann Arbor, Mich.-based chain also got an infusion of high-interest cash to keep its ambitious turnaround plan afloat this year.
Investors responded harshly, sending Borders stock to an all-time low of $3.97 a share Thursday on the New York Stock Exchange. It closed down $2.03, at $5.07 a share, and has lost 51 percent of its value since January. It also suspended paying dividends to shareholders.
If Borders is purchased and the headquarters is moved out of state, "it would be yet another sad example of a homegrown company leaving" as Michigan's economy sags, said Patrick Anderson, an East Lansing economist.
"I am very hopeful that Borders will stay here. The main problem Borders has is the financial markets and the slowing economy, not anything we have done in Michigan," he said.
Traditional bookstores have struggled in recent years as more people buy books online or at supercenters and warehouse stores. On Thursday, Barnes & Noble reported a 9.2 percent fall in profits for the fourth quarter. But Barnes & Noble boosted dividends and predicted a profitable first quarter for this year.
Borders, in contrast, suspended dividends, and arranged $42.5 million in financing at 12.5 percent interest from its largest shareholder, Pershing Square Capital Management LP.
"I'm definitely upset at the decline in the share price. I'm a little bit in shock," said John Chevedden, 62, of Redondo Beach, Calif., who owns 250 shares of Borders stock. "I don't know if it means things are worse than they look. The other side of it is they are pre-emptive and they are trying to fix things before they get really bad."
Borders Chief Executive Officer George Jones told the Detroit Free Press on Thursday that a loan was needed because the retail environment became increasingly brutal after the credit crunch that began in August. There are no plans for layoffs, he added.
While industry analysts said New York-based Barnes & Noble will be a likely suitor for Borders, the Ann Arbor, Mich.-based chain also got an infusion of high-interest cash to keep its ambitious turnaround plan afloat this year.
Investors responded harshly, sending Borders stock to an all-time low of $3.97 a share Thursday on the New York Stock Exchange. It closed down $2.03, at $5.07 a share, and has lost 51 percent of its value since January. It also suspended paying dividends to shareholders.
If Borders is purchased and the headquarters is moved out of state, "it would be yet another sad example of a homegrown company leaving" as Michigan's economy sags, said Patrick Anderson, an East Lansing economist.
"I am very hopeful that Borders will stay here. The main problem Borders has is the financial markets and the slowing economy, not anything we have done in Michigan," he said.
Traditional bookstores have struggled in recent years as more people buy books online or at supercenters and warehouse stores. On Thursday, Barnes & Noble reported a 9.2 percent fall in profits for the fourth quarter. But Barnes & Noble boosted dividends and predicted a profitable first quarter for this year.
Borders, in contrast, suspended dividends, and arranged $42.5 million in financing at 12.5 percent interest from its largest shareholder, Pershing Square Capital Management LP.
"I'm definitely upset at the decline in the share price. I'm a little bit in shock," said John Chevedden, 62, of Redondo Beach, Calif., who owns 250 shares of Borders stock. "I don't know if it means things are worse than they look. The other side of it is they are pre-emptive and they are trying to fix things before they get really bad."
Borders Chief Executive Officer George Jones told the Detroit Free Press on Thursday that a loan was needed because the retail environment became increasingly brutal after the credit crunch that began in August. There are no plans for layoffs, he added.
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