From Publishers Lunch

Borders, Still Dirt Cheap, Jumps As Goldman Hopes for BN Buy

We've always regarded it as a poverty of imagination that Barnes & Noble is often tipped as a potential acquirer of Borders, and they strike us as among the least likely of acquirers.

But Goldman Sachs analyst Matthew Fassler wrote in a report yesterday "we see improved prospects for a deal," and that "Barnes & Noble could generate significant accretion from an acquisition of Borders."

As Bloomberg reports, "Barnes & Noble may add more than 10 percent to profit if it paid as much as $13 a share for Borders in an all-cash transaction, Fassler said. An all-stock transaction of as much as $10 a share might also add at least 10 percent to profit, he said." (Bear in mind that even at $10 a share, top shareholder Pershing Square--which could easily buy the company itself--will still show a substantial loss on their investment.)Borders stock jumped on the report, recovering some of its plunge from last week, giving the whole company a market capitalization of just over $400 million.

At current prices lots of companies could buy Borders.Meanwhile, Barnes & Noble doesn't have to bid for Borders to reap the benefits. The company's value has increased by over $310 million since late last week on the news of Borders' troubles.

Bloomberg