Borders Books may be looking for a buyer. On Wednesday, Borders Group, Inc., announced that they have retained J.P. Morgan Securities and Merrill Lynch “to assist the company as it explores strategic alternatives. The review process will include the investigation of a wide range of alternatives including the sale of the company and/or certain divisions for the purpose of maximizing shareholder value.”
The company also announced that they’ve received a financing commitment from Pershing Square Capital Management, which will take the form of a loan of up to $42.5 million and an offer to purchase “certain of the company’s international businesses pursuant to a $125 million backstop purchase commitment.” Pershing is Borders’s largest shareholder.
Borders Group CEO George Jones said in the announcement: “This will be a challenging year for retailers due to continued uncertainty in the economic environment. The company determined that additional capital was required to execute our operating plan, and as a result we began to explore various financing options. The current credit environment has made many of these alternatives prohibitively expensive or entirely unavailable. We are pleased to have the confidence and backing of our largest shareholder, Pershing Square, which has agreed to provide funding that gives us adequate opportunity to implement our plans this year and pursue a range of longer term solutions through the strategic alternatives review process. We believe that consummation of the transactions under the commitment will make us fully funded for 2008, where absent these measures, liquidity issues may otherwise have arisen in the next few months. Furthermore, we believe that resolving our 2008 funding needs and positioning Borders to perform the way we believe it can, puts our company in a position to succeed in future years. Overall, we believe that the 2009 financial targets we set back in March of last year remain attainable, yet within the current economic environment, we will be slowed in our progress and expect that we’ll reach them later than originally anticipated. Still, we believe our strategic plan remains the right path toward achieving these goals.”
Under the financing agreement, Borders has the right to require Pershing Square to buy its Paperchase, Australia, New Zealand, and Singapore subsidiaries, as well as Borders’s 17% interest in Bookshop Acquisitions, Inc. (Borders UK).
The company’s full press release, which includes financial statements, is available here.