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Borders UK in sale talks with private equity group

Struggling bookseller close to selling off its 46 stores

By James Thompson

The ailing bookseller Borders UK is in advanced talks with Hilco's private equity arm over a potential sale of its 46 stores. The restructuring company's Valco Capital Partners unit plans to acquire the entire shareholding of Borders UK and take the company forward.

Valco is offering to take on the Borders superstores, Books Etc and Borders Express shops in a deal that could save hundreds of jobs, although it is likely that some stores may close.

It is understood that up to two other companies are involved in separate discussions with Borders, although their intentions are unclear. The group has debts of less than £10m but it is thought its main bank Landsbanki is keen to sew up a deal in the coming weeks. Valco and Borders refused to comment last night.

The future of Borders has been the source of feverish speculation since the chain, owned by Luke Johnson's private equity company Risk Capital Partners, appointed Clearwater Corporate Finance to conduct a potential sale at the end of May.

Since Mr Johnson, who is also the chairman of Channel 4, and Risk Capital acquired Borders for £20m in 2007, the bookseller has struggled in a declining market for book shops, with huge sales volumes migrating online to retailers such as Amazon.

Valco Capital Partners is thought to have identified value in keeping Borders running, and is keen to retain the existing management team, including the chief executive Philip Downer. In March, the bookseller appointed the restructuring company RSM Bentley Jennison to review its business and what value it could extract from its portfolio of stores.

On Sunday, it emerged Borders was in the process of selling five of its branches, including its 39,000 sq ft flagship store in London's Oxford Street, to the discount fashion retailer New Look. The other four outlets were Dublin's Blanchardstown Centre, Llantrisant in Anglesey, London Colney and Swindon, and a massive clearance sale is under way.

Hilco, the distressed debt specialist, tried to acquire Woolworths in late 2008 but ended up working on its massive stock clearance before it closed in January.

Earlier this year, Valco acquired Denby Pottery, the 200-year-old manufacturer of premium tableware, in a £30m management buyout deal and the company is thought to be progressing. In March, Hilco's private equity arm bought Allied Carpets, Britain's second-biggest carpet retailer. Valco acquired the 217-store flooring retailer via Sigma Capital Investments, but it later emerged that Hilco was the lead investor behind the fund.

Hilco had wanted to keep its name, which has previously been linked with distressed retail situations, out of the press to stabilise the business. Last month, Allied Carpets Properties division filed a notice of intention to appoint administrators, but this has not yet occurred. It is thought Valco wants to take Allied Carpets forward but with fewer stores.

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Comments

Borders Top Management
[info]doctorblack02 wrote:
Wednesday, 15 July 2009 at 11:58 am (UTC)
I cannot believe, as one of the staff about to be laid off from a SUCCESSFUL store, that this new company would keep the management team in place. 'P.D' in particular and his crew have brought disaster to the company, the only time it did well was when he was demoted!!! We are a hard working team and have fought hard to meet and beat all deadlines, unlike many sister stores, to be rewarded with closure and 200+ (remember Borders also have Paperchase, Game and Starbucks concessions), odd job losses so 'P.D' and friends can keep their healthy pensions. How any right minded business could possibly believe this man could bring them profit is beyond me and ANYONE else in the publishing/book retail industry. He will rue the day, he has made 200+ successful staff very very unhappy and looks like more to come...

I wonder how long this post stays up for...
Re: Borders Top Management
[info]jeanjeanie57 wrote:
Wednesday, 15 July 2009 at 01:30 pm (UTC)
Having read doctorblack02's comment, I'd say I cannot agree more. Speaking as an ex-employee who left because of the atrocious management techniques of the senior team. Their imminent demise is no surprise. The only time that Borders has shown any sign of forward thinking and strategic competence has been whilst David Roche was at the helm. This has been demonstrated by the unusually high number of senior management with wide industry experience that have continued to leave the business since Roche's departure. I just feel sorry for the hard working and loyal team members working in stores.
Borders and retail in the UK
[info]pecksgp wrote:
Wednesday, 15 July 2009 at 05:57 pm (UTC)
Having spent twenty years at HMV, including a directorship, I feel that I am qualified to comment on the Borders scenario.
ALL retailers that are having problems have exactly the same issue, which is increasing operating costs. Primarily the position of landlords and the governments lack of involvement.
As with Woolworths and so many others. Borders' rents on it's retail property would have been subjected to five yearly "upwards only" rent reviews. With sales declining and profit margins in High St retailers thinning due to the rise of the internet, ALL retailers are having to make tough decisions. Usually this means cutting staff costs. We therefore end up in the ironic position of poor service in-stores so why not buy cheaper on the internet, vicious circle any-one? The government still charges rates regardless of it's alleged commitment to protecting jobs in this country, making retailers and landlords pay massively over what the current economic climate can support.
Of course strategically Borders could have mad a hundred better decisions over the past few years to mitigate it's position. Eg: Invest in the internet sooner, maximise shop-floor space sales (Shops were generally too big for the offer), Don't miss the boat on console games sales three years ago, Don't open your own distribution centre in.....Cornwall!, Obvious strategic decisions, however tactically removing Mr Roche, who after all cut his teeth doing the job that Borders required at Waterstones and HMV for many years was, it appears a poor decision.
Having said all that the bottom line was that this chain was competing with Waterstones and HMV for too long, and just wasn't very good at it. A bit like sending Barnet to play Barcelona in the Nou Camp I'm afraid. Apologies if I've offended any-one (In Cornwall, Barnet or Borders), but how many more High Streets and retail parks will need to be emptied by retailers going bust, before this government forces the landlords hand?
S Peck