The biggest part of this news is not the possible Barnes and Nobel (BKS) bid for Borders (BGP)
Here is the big news, according to the Wall St. Journal,30 people, including strategic buyers and private equity firms, have either signed confidentiality agreements or are in talks to sign agreements so they can look at a bid for Borders.
There are some anti-trust issue with a possible BKS bid. Amazon (AMZN) is the #2 book seller with 15% of the market and a BKS, BGP combo would then have over 30%. Based on recent results (Whole Foods (WFMI) & Wild Oats, XM (XMSR) & Sirius (SIRI)) however, even if the government did object, chances are the merger would still eventually go through anyway.
Just yesterday, Carlye’s David Rubenstein said that, far from being dead, private equity deals in the $2 billion to $4 billion range will take precedence. “We are casting our net wider for $2 billion to $4 billion deals that will require little or no debt” said Rubenstein. He continued, “I think that the bottom has been hit in terms of private-equity investing activity and you’re now beginning to see the upward swing”.
Borders has a current market cap of $350 million and $580 million in debt. A deal that gave shareholders $12 a share would come in at $1.3 billion and change. At this price, the number of buyers who could purchase the chain is plentiful and perhaps the reason for the wide interest.
30 potential buyers will make for a very interesting and competative bidding process and is very good for shareholders.
We bought shares at $5 and change looking for this very possibility, not as a long term permanent holding. While sure this would eventually happen, I thought it was far more likely towards the fall as the Ackman financing and dilution deadline approached.
Either way, gonna be a fun summer with this one.
Disclosure (“none” means no position):Long BGP, none
