Ackman Offers To Help Borders Bid For Barnes & Noble

The regulator filing reads:

The Reporting Persons have informed the Issuer that they would be prepared to finance, on mutually acceptable terms, an offer by the Issuer to purchase all of the equity securities of Barnes & Noble, Inc. (“BKS”) in an all-cash transaction valued at $16 per share. In the alternative, the Reporting Persons have informed the Issuer that they would be prepared to finance, on mutually acceptable terms, an offer for mixed stock and cash consideration, to the extent BKS stockholders prefer to share in the substantial synergies of the business combination and receive equity in the combined company.

Thwarted in his bid to buy Barnes & Noble (NYSE: BKS) due to a poison pill and the will of the book company’s founding Riggio family, Ackman has turned improbably to one of the weakest retail companies in the US–Borders (NYSE: BGP). Borders is a much smaller competitor to Barnes & Noble. Borders Groups shares trade just over $1. The company has teetered close to Chapter 11 and has closed stores each of the last three years.

The Borders offer for Barnes & Noble would be insulting, if it is indeed at $16. Barnes & Noble shares currently trade at $13.The fortunes of Barnes & Noble, beaten down by e-commerce companies like Amazon.com (NASDAQ: AMZN) has been so poor that the bricks-and-mortar firm’s shares are down from a 52-week high of $24.71.

Barnes & Noble may not sell for $16, but the combination of the two book sellers together would allow them to cut expenses and close redundant stores. Those options alone should make a deal attractive.

Douglas A. McIntyre