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Without new bidders, a bankruptcy court closes the final book on Borders Group
Unable to compete in a market that has moved largely to the web and e-books, Borders is closing shop and liquidating its assets. “We were all working hard towards a different outcome,” says president Mike Edwards, but headwinds including the e-reader revolution “brought us to where we are now.”
Late to the web and slammed by the rapid rise of electronic books, Borders Group Inc. is going out of business.
Borders, the country's second-largest chain of bookstores and No. 200 in the Internet Retailer Top 500 Guide, is liquidating its assets after no last-minute bidders emerged to acquire the company as of a July 18 deadline.
A week before that deadline, the creditor committee overseeing the retailer's bankruptcy plan rejected a bid from Direct Brands as being too low. Borders had entered into a preliminary agreement July 1 to be sold at an upcoming auction to Direct Brands, a unit of investment banking firm Najafi Cos., for about $215.1 million in cash and the assumption of about $220 million in debt.
When no higher bidder stepped forward, the U.S. Bankruptcy Court for the Southern District of New York approved the sale of store assets to two liquidation firms, Hilco Merchant Resources and Gordon Brothers Group. Borders, which was operating 399 stores and had about 10,700 employees, expects to finish its liquidation by the end of September.
Borders had made several attempts to revitalize its business in recent years. In 2008, it launched its own retail e-commerce site—including a "Magic Shelf" that let online shoppers choose books from a bookshelf-like interface—after having relied on the e-commerce platform of Amazon.com Inc. It invested in e-reader company Kobo Inc. in 2009 and began offering the Kobo e-reader last year.
But the retailer was considered late to the e-books trend as well as to e-commerce overall, and it went through several management changes in recent years in an unsuccessful effort to compete with No. 1 bookselling chain Barnes & Noble Inc. and web powerhouse Amazon.
Hilco and Gordon now own all of the retailer's intellectual property, including Borders.com. The new owners did not immediately say when the chain will cease selling online. Borders sold about $75.2 million online in 2010, up 20% from $60 million in 2009.
Borders filed for bankruptcy in January and listed assets of
$1.27 billion and debts of $1.29 billion. Several book publishers are among those left holding Borders IOUs. Borders owes $41.1 million to Penguin Putnam Inc., $36.8 million to Hachette Book Group, $33.7 million to Simon & Schuster Inc., $33.4 million to Random House, and $25.8 million to Macmillian/MOS.
"Following the best efforts of all parties, we are saddened by this development," says Borders Group president Mike Edwards. "We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution, and turbulent economy, have brought us to where we are now."