No Storybook Ending for Borders Group
It started with a "novel" beginning almost 50 years ago—when Lawrence Hoyt opened his first independently owned bookstore in Pittsburgh, Pa., calling it The Walden Book Store in tribute to Henry David Thoreau's literary classic, "Walden," and when nine years later Tom and Louis Borders opened their first 800-square-foot used bookstore in Ann Arbor, Mich. But it has, unfortunately, not had a storybook ending.
Borders Group (the result of several Walden-Borders acquisitions) began its going-out-of-business sales Friday, July 22, in all 399 of its remaining locations, as part of the company's court-approved liquidation, which is being managed by a joint venture composed of Gordon Brothers Group, LLC; Hilco Merchant Resources, LLC; Great American Group, LLC; SB Capital Group, LLC; and Tiger Capital Group, LLC, according to a Gordon Brothers Group press release.
"A spokesperson for the joint venture said, 'This is the final opportunity for consumers to take advantage of truly compelling discounts on a tremendous selection of literature, entertainment media and much more. We anticipate that today’s value-conscious consumer will respond very positively to these outstanding savings. We expect this will be a short sale,'" according to the press release.
The 399 stores include 259 Borders superstores, 114 Borders Express and Waldenbooks stores, and 26 Borders airport stores, according to Gordon Brothers Group. "Over $700 million of inventory, including books, puzzles/games, activity sets, stationery, magazines, music and movie media, calendars, posters and more will be liquidated, as well as store fixtures, furnishings and equipment," the company announced.
The liquidation sales mark the end of Borders' struggle to stay afloat since filing for bankruptcy earlier this year.
In February, Borders Group Inc. released a press release revealing that the bookstore chain had filed a petition for reorganization relief under Chapter 11 of the Bankruptcy Code.
In that press release, Borders Group President Mike Edwards stated, "It has become increasingly clear that in light of the environment of curtailed customer spending, our ongoing discussions with publishers and other vendor related parties, and the company's lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term. To position Borders to remedy this condition, Borders Group, with the authorization of its board of directors, has filed a petition for reorganization relief under Chapter 11 of the Bankruptcy Code. This decisive action will give Borders the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganize in order to reposition itself to be a successful business for the long term.”
Since then, several attempts have been made to save Borders from complete demise. A June 30 press release from Borders announced that the company had entered into a preliminary agreement with Direct Brands, a portfolio company of Najafi Cos. According to the press release, the agreement would have allowed Direct Brands' purchase of nearly all Borders assets for $215.1 million, as well as its assumption of about $220 million of liability. The deal was meant to save a significant number of Borders stores from closing. However, as reported by BusinessWeek.com, Najafi decided not to make the bid for Borders after refusing to drop the option to liquidate.
A few weeks later, on July 18, Borders announced in a press release that it would submit a proposal from liquidators Hilco Merchant Resources and Gordon Brothers Group to the court for approval, allowing Hilco and Gordon to purchase all remaining Borders stores and assets, and begin the liquidation process.
"Following the best efforts of all parties, we are saddened by this development," Edwards said in the press release. "We were all working hard toward 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."
On July 21, U.S. Bankruptcy Court Judge Martin Glenn approved the liquidation proposal, according to a Wall Street Journal article. According to the article, Books-A-Million Inc. submitted a bid for the leases and inventory of 30 to 35 Borders locations. The deal would mean that those locations would not be liquidated, and instead would continue on as Books-A-Million bookstores. The transaction would save at least 1,000 jobs out of 10,700. However, according to a July 26 Associated Press article, the deal was unsuccessful.
According to the Washington Business Journal, Books-A-Million's "'efforts to secure the inventory, fixtures, equipment and leasehold interests for 30 Borders stores has ended unsuccessfully because the parties could not agree on terms and the going out of business sales at these locations commenced,' Clyde Anderson, Books-A-Million CEO, said. 'We worked exhaustively in an effort to acquire these stores and reach agreements with all of the parties whose consent was necessary. Unfortunately, we were unsuccessful.'"