Friday, August 31, 2007


The following report from the Detroit News:

The chances of a merger between Ann Arbor-based Borders Group Inc. and Barnes & Noble Inc. -- the nation's two largest book sellers -- is more possible than ever in light of a federal antitrust ruling last week, some analysts said this week.

Borders' continuing struggles to make money -- the company lost another $25.1 million in the second-quarter -- also increases the possibility of a future merger, they said.
Last week, a federal court ruled that a combination of the nation's largest organic grocers didn't violate antitrust rules. U.S. regulators had argued that the merger could reduce competition and inflate prices for organic grocery shoppers.

The combination of Whole Foods Market Inc. and Wild Oats Markets closely mirrors a potential deal between Borders and Barnes & Noble and "could be perceived as a potential new precedent and open up meaningful discussions," David Schick, an analyst at Stifel Nicolaus & Co. in New York, wrote in a report to investors earlier this week.
The talk of a potential merger of Borders and Barnes & Noble comes as both firms struggle against online rivals such as and big-box retailers such as Target. Online stores often offer lower prices, and big-box stores are offering a much wider selection than they have in the past.
Those struggles have led many industry analysts to speculate that by combining forces, the two companies might be able to better tackle the competition.
In the face of such difficulties, Borders announced a major corporate restructuring plan in March meant to streamline operations, boost sales and return the company to profitability. So far, the changes haven't yet reversed Borders' losses, though officials note the turnaround plan hasn't been fully implemented.

Spokesmen for both booksellers on Thursday declined to comment on any hypothetical deal between the two companies. Their silence, however, hasn't stopped market speculation.
Matthew Fassler, an analyst at Goldman Sachs in New York, wrote in an Aug. 17 report that Borders stock traded above $20 earlier in the year only because of the potential for acquisition by Barnes & Noble, not on the company's own financial merits.
Since hitting a peak of $22.29 per share on May 31, Borders stock has plummeted 34.2 percent, to a close of $14.66 at the end of trading Thursday.
Barnes & Noble also is struggling on Wall Street. Its shares closed at $35.54 Thursday, down 17 percent since its high of $42.82 on May 24.

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