L.A. private equity billionaire may buy at least half of Borders
A Los Angeles private equity firm, led by the billionaire brother of the financier who is buying the Detroit Pistons, is reportedly considering an acquisition of more than half of the bookstores owned by Ann Arbor-based Borders Group Inc.
Alec Gores' Gores Group LLC is discussing a possible bid to acquire part of Borders for around $200 million, according to a Wall Street Journal report published tonight that cited anonymous sources. Alec Gores' brother, Tom Gores, recently struck a deal to acquire the Detroit Pistons.
Alec Gores' firm is reportedly managing a $2 billion pool of cash designated for acquisitions.
Borders, which filed for Chapter 11 bankruptcy in February, will have about 270 superstores and about another 130 small-format stores. The firm had about 500 superstores when it filed for bankruptcy.
Borders is actively developing a reorganization plan and trying to convince publishers to agree to new product shipment terms, which CEO Mike Edwards has identified as critical to the company's viability.
According to the WSJ report, Gores would reportedly continue to operate Borders "as a going concern," a term for an independently operating business. It's not clear whether that would involve keeping the company's Ann Arbor headquarters, where fewer than 400 employees remain.
Meanwhile, Borders is set to argue Thursday in U.S. Bankruptcy Court's Southern District of New York that it deserves a four-month extension on its exclusive right to file a reorganization plan. But the company's top creditors — namely, publishers — objected to that motion and want the right to file their own competing plan.
The deal negotiations come after Borders' top creditors filed a motion last week asserting that Borders is "likely" to sell its assets within the next 30 to 60 days instead of reorganizing under bankruptcy protection.
Borders has lost some $180 million since filing for bankruptcy.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
washtelanti
Fri, Jun 3, 2011 : 1:24 a.m.
The Gores Group has been through Ann Arbor before and after purchasing a local company, reduced the employee population dramatically, then sold off the remaining assets. I believe that overall it was a rather productive investment for them. As I recall a comment made to the employees shortly after the company was purchased included the following statement: "There are two ways this company can make money... increase sales or decrease costs" Unfortunately, he outcome was the latter... I hope that the potential purchase of Borders works out much better for the remaining employees and the Ann Arbor community.
Kai Petainen
Thu, Jun 2, 2011 : 4:18 p.m.
this sounds like a risky deal? perhaps not? i wish them the best....
Huron74
Thu, Jun 2, 2011 : 3:10 p.m.
Just another fast-buck vulture swooping down to get first pick at the good parts of the soon to be dead corp before the hyenas, jackals, bankruptcy lawyers and other carrion eaters pick it all clean. Too bad for the creditors, ex-employers, and all the others who'll likely get nada, or pennies on the dollar if they're lucky. If Borders was a horse at least we could just shoot it.
Mike
Thu, Jun 2, 2011 : 12:05 p.m.
This is horrible; a private business wants to buy Borders. The government and the taxpayers should do this. Buisnesses are evil and greedy and only want to make a profit. The government is well meaning, kind, and always looks out for the little guy as long as he pays more taxes.
A2comments
Thu, Jun 2, 2011 : 10:52 a.m.
Most distressed purchases make sense, for a few years anyway. You start with no money owed to creditors. You borrow hugely to make the acquisition. You pay yourself a management fee that's tens of millions a year. Then, you take it public and get all your investment back, and make a profit. The only risk is that the debt load is too heavy and you never go public and never get your investment back. But you did get the annual mgmt fee that goes to your firm (not the investors) and you aren't playing with your own money.
Roadman
Thu, Jun 2, 2011 : 4:20 a.m.
"Borders has lost some $180 million since filing for bankruptcy." Unless Mr. Gores has some radically successful ideas on how to turn Borders around, it does not seem like such a great investment. Remember the Cerebus fund that invested some $7 billion into Chrysler Corporation - not a good idea.
johnnya2
Thu, Jun 2, 2011 : 12:07 p.m.
One major difference, Cerebus did not gain the benefits of bankruptcy. Chrysleer is currently profitable. If Border's has a BK turnaround like Chrysler, Mr Gores would be a hero to his investment group. Borders can be profitable with fewer stores, lower leases, longer payment terms with publishers. That is what the BK court is going to allow them to do.
Joe Hood
Thu, Jun 2, 2011 : 4:27 a.m.
Don't look at it as an investment, think of it as a donation to Michigan.