Borders Takes $95m To Get Out Fast
Sydney Morning Herald
Saturday June 7, 2008
AN ABRUPT about-turn by its increasingly cash-strapped US parent company has finally handed the Borders bookstore group in Australia and New Zealand to its long-term suitor and competitor, Angus & Robertson.
The on-off sale of the local arm of Borders to A&R Whitcoulls was sealed late on Thursday following the American owner's decision to resume negotiations with the most likely buyer almost three months after the original deal between them fell over. Having previously sought an ongoing equity stake in the business at a price at least 10 per cent higher than the final terms, Borders US has decided to take about $95 million in cash immediately and sell out of its Australasian business completely. The deal could be worth up to $110 million in the long run, depending on how Borders with its 30 stores in Australia, New Zealand and Singapore performs under its new owners between now and next March. A&R Whitcoulls, which is owned by the major private equity player Pacific Equity Partners (PEP), will pay a further $15 million to Borders US if financial targets are met. However, the American retailer appears to have accepted much less than the $125 million that was mooted when the two groups were close to finalising their previous deal. Since then, the financially stricken company - which started shedding its international operations a year ago to help reverse a huge slide in profits - has announced higher first quarter losses compared to last May. It has also cut jobs at its head office by 20 per cent and plans to slash costs by an extra $US120 million ($125 million). In its statement announcing yesterday's sale, the US parent underlined the financial imperative it attached to offloading the Melbourne-based chain. "This transaction represents an attractive valuation, permits us to forgo further investment in these businesses, and provides our company with a significant cash infusion to further reduce debt, which is one of our key financial initiatives," said George Jones, chief executive of Borders US. The comments from A&R Whitcoulls' managing director, Ian Draper, could not have come in starker contrast. "These are two very powerful brands and a very good strategic fit," he said, expressing his delight at completing a deal that will significantly boost his book and newsagent retailing operations. A&R's owners, PEP, had long pursued the acquisition as part of its plans to eventually float the combined group on the stock market. However, such a move is unlikely to happen for a year or two given the need to extract Borders from the complex operational embrace of its former parent. A&R intends to expand the Borders brand beyond its strongholds of NSW, Victoria and Queensland by pushing ahead with ambitions to become a national chain, as outlined by John Campradt, the managing director of Borders Pacific Rim, who will continue to run the business. The purchase gives the group a major slice of the upper end of the book-buying sector. Angus & Robertson's had a more mass-market approach to the business, with 184 stores around Australia.
© 2008 Sydney Morning Herald
