Borders investor William Ackman: Bankruptcy not inevitable for book store chain
The largest investor in struggling Ann Arbor-based Borders Group Inc. believes the book store chain will avoid bankruptcy but that the company may not survive on its own.
William Ackman, CEO of New York-based hedge fund Pershing Square Capital Management, which owns at least 17.7 percent of Borders' shares, told CNBC on Tuesday that he foresees a "low probability" of bankruptcy for Borders.
Ackman's statement encouraged investors, who flocked to beaten-down Borders shares (NYSE: BGP) today, sending the stock price up about 35 percent to $1.27 as of 2:24 p.m.
But Ackman also suggested that Borders could eventually merge with competitor Barnes & Noble -- which would almost surely mean a significant reduction in Borders' stores and its 650-person corporate workforce in Ann Arbor.
"We don't see this as a likely bankruptcy," Ackman told CNBC. "It may become part of an industry consolidation at some point, or it may survive as a standalone company."
Borders has to repay a $42.5 million senior secured loan to Pershing by April 1 -- a deadline that has caused some investors and experts to speculate that Borders will have to restructure or liquidate.
The firm reported disappointing holiday sales and laid off 88 workers at its Ann Arbor headquarters on Jan. 28. That came after CEO Ron Marshall resigned, leaving the interim post to executive vice president Michael J. Edwards.
"I think the company has really stabilized itself financially," Ackman said.
Contact AnnArbor.com’s Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter.
Comments
bunnyabbot
Thu, Feb 4, 2010 : 12:27 a.m.
whenever anyone says "not inevitable" it usually means it is. also, whenever a store the size of borders has empty shelves and wide open spaces it means they can't more product from suppliers, that is no one is shipping them stuff on credit b/c they either are not pay thier bills or maxed out their accounts with suppliers.
ShadowManager
Wed, Feb 3, 2010 : 10:53 p.m.
I believe I believe! I believe Borders will survive, Google will bring 1000's of jobs to Ann Arbor, the University will turn the old Pfizer campus into a health care hub, someone's gonna build a train that runs from Brighton to Detroit, there's gonna be a greenspace someday down in the gully by the YMCA, and chickens will roost in every yard of our fair town!
Somewhat Concerned
Wed, Feb 3, 2010 : 10:42 p.m.
Has Ackman actually been in a Borders recently? Has he seen the half-empty shelves and the wide open spaces where shelves full of books used to be? Has he heard his employees tell a customer who is ready to buy books that Borders won't meet Amazon's price because "we can't compete with them." I understand that I am supposed to cheer for Borders because they are an A2 company, and I am cheering for them. I'm just not going to visit stores that have such a thin selection of books, and I'm not going to pay 25% more for my books by shopping there. It seems to be the same for lots of other people, too. I owe them a cheer because they're from A2, but I don't owe them a subsidy.
CynicA2
Wed, Feb 3, 2010 : 6:23 p.m.
This is the last guy who is likely to tell anyone the straight story on Borders... you might say he has a vested interest in talking the stock up. Why would Barnes and Noble want to buy a boat anchor?! They have already passed on this once before. The only thing Borders generates consistently anymore are losses... and pie in the sky. Buhbye.
Lokalisierung
Wed, Feb 3, 2010 : 4:30 p.m.
Obviously this guy hasn't been told about his own evil plot not to let dogs in the store. My god, how could they ever hope to survive?