Borders is closing its 399 remaining stores and 11,000 employees are being laid off. In a statement, Borders Group President Mike Edwards said, “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.”
Yesterday’s deadline for new bids on Borders came and went, with Phoenix-based venture capital firm Najafi “reluctantly” declining to submit a new bid and liquidation firms Hilco and Gordon Brothers the only bidders left at the table. It appears that discussions with Birmingham, Alabama-based bookstore chain Books-A-Million and other interested parties about last-minute arrangements just didn’t pan out.
Borders filed for bankruptcy in February and has already closed about 200 stores. A bidder didn’t step forward until early June, when Los Angeles-based venture capital firm The Gores Group expressed interest in about half of Borders’ remaining stores, at a price of around $200 million (that would have been just about $1 million per store). Then came more good news: Najafi Companies, which also owns direct marketing music, DVD and book club company Direct Brands, came forward as a second possible bidder.
Borders chose Najafi Companies as its stalking-horse bidder. Najafi would have kicked off the court-supervised auction with a starting bid of $215.1 million, plus the assumption of about $220 million worth of liabilities. But Borders’ lenders and creditors’ committee balked, saying they’d get more money–at least $252 million–from the liquidators, and they feared Najafi would liquidate the remaining stores anyway. Najafi had the chance to submit a new bid, but didn’t, and, well, here we are.
Here is Borders’ official statement, which first appeared in the WSJ’s Deal Journal and is not yet on Borders’ website. Deal Journal also has Edwards’ letter to Borders employees, which blames Borders’ bad end on “external forces.”
Borders Group to Submit Hilco and Gordon Brothers Proposal to Court for Approval
– Hilco and Gordon Brothers to purchase store assets of the business and administer liquidation process
– Borders extends gratitude to dedicated employees and loyal customers
Ann Arbor, July 18, 2011 – Borders Group reported today that, in accordance with the terms of its financing agreement, the Company will submit to the Court for approval the previously-announced proposal from Hilco and Gordon Brothers to purchase the store assets of the business and administer the liquidation process. Borders said that, in the absence of a formal proposal from a going concern bidder, it did not require an auction prior to presenting the proposal to the Court at a scheduled hearing on Thursday, July 21, 2011.
“Following the best efforts of all parties, we are saddened by this development,” said 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, eReader revolution, and turbulent economy, have brought us to where we are now,” he added.
“For decades, Borders stores have been destinations within our communities, places where people have sought knowledge, entertainment, and enlightenment and connected with others who share their passion. Everyone at Borders has helped millions of people discover new books, music, and movies, and we all take pride in the role Borders has played in our customers’ lives,” Edwards continued, “I extend a heartfelt thanks to all of our dedicated employees and our loyal customers.”
Borders currently operates 399 stores and employs approximately 10,700 employees. Subject to the Court’s approval, under the proposal, liquidation is expected to commence for some stores and facilities as soon as Friday, July 22, with a phased rollout of the program which is expected to conclude by the end of September. Borders intends to liquidate under Chapter 11 of the Bankruptcy Code and, as a result, Borders expects to be able to pay vendors in the ordinary course for all expenses incurred during the bankruptcy cases.