Borders Group Inc. won court approval to liquidate its remaining 399 stores starting tomorrow, even as the book retailer negotiates with creditors on a last-minute bid for some sites from Books-A-Million Inc.
U.S. Bankruptcy Judge Martin Glenn in Manhattan today approved Borders’ request to wind down the 40-year-old bookstore chain, once the second-largest in the U.S. Borders, with about 10,700 employees, said this week that it planned to close all of its stores in phases by September.
The deal with liquidators was approved over the objections of 99 landlords and creditors, following an offer this morning from Books-A-Million for as many as 35 stores that has yet to be documented or approved by a committee of creditors.
“Hopefully, the Books-A-Million transaction will at least help some employees with jobs,” Glenn said. He said he couldn’t approve that deal until he sees a final agreement.
Going-out-of-business sales will begin tomorrow, under the agreement with liquidators led by Hilco Merchant Resources and Gordon Brothers Retail Partners LLC. They made the best and highest offer, according to Borders, after it failed to reach an agreement with the one bidder that offered to keep the company running, Phoenix-based private-equity firm Najafi Cos.
Judge Glenn wrote in a court order today that the sale to Books-A-Million can take place “only with the express written consent of the debtors, the committee and the agent,” and that consent “may be withheld for any reason.”
Today’s proposal from Books-A-Million may save 1,000 to 1,500 jobs and boost returns to creditors, said Borders lawyer Andrew Glenn, no relation to the judge.
“This is a bittersweet day,” Andrew Glenn told a packed courtroom. “There are a lot of sad people around the country, a lot of sad people in the corporate headquarters. But there has been a late-breaking development.”
Books-A-Million offered to buy about 21 super-stores and nine smaller stores. Seven of the 30 stores are in Pennsylvania. The company also has an option on five more stores, bringing the potential total to 35, lawyers said. The super-stores include sites in Atlantic City, New Jersey, and Waterford, Connecticut.
“We still have to get a firm handle on what the details of the Books-A-Million deal are and what, if any, incremental value the five additional stores bring,” said Bruce Buechler, a lawyer for creditors.
Borders rose 12 percent to 2.8 cents at 3:36 p.m. New York time in over-the-counter trading, after almost doubling to 4.9 cents. Books-A-Million climbed 6 cents, or 2 percent, to $3.02 in Nasdaq Stock Market trading. The shares earlier gained as much as 9.8 percent.
Books-A-Million would likely buy Borders’s inventory from the liquidators and use a similar cost structure. The liquidators agreed to pay about 72 percent of the inventory’s cost value, which was estimated at $350 million to $395 million.
Landlords would get information about what leases Books-A-Million would assume on an “informal basis,” Andrew Glenn said. The company would prefer to avoid litigation with landlords, he said.
Books-A-Million, which also runs stores under the names Books & Co., Bookland and Joe Muggs Newsstands, is based in Birmingham, Alabama, and operates in the southeastern U.S.
Borders is based in Ann Arbor, Michigan, where Tom and Louis Borders founded the company with one location in 1971. At its height in 2005, Borders had more than 1,200 bookstores as far away as Singapore, 15,000 employees and annual sales of $4 billion.
Barnes & Noble Inc., the largest U.S. book chain, has 1,341 stores, including 636 college bookstores, according to its website.
Borders lost business as customers switched to e-readers such as Amazon.com Inc.’s Kindle, introduced in 2007. Barnes & Noble invested in its own Nook device to attract customers.
The case is In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York (Manhattan).