Borders Closer to Liquidation; Deadline Passes Without Bidder

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Borders' bid deadline passed Sunday without any offers to keep the U.S.'s second-largest bookstore chain alive, so the Ann Arbor, Michigan-based company moves closer to liquidation.

The company still has slim hope, however, as the Wall Street Journal reports Monday that Borders was in discussions late Sunday with Books-A-Million for some sort of deal. Books-A-Million is based in Birmingham, Alabama, operating 231 stores in 23 states.

But it's not likely those discussions, or others being entertained at the last minute by Borders, will keep the majority of the chain's 400 stores open, even if some sort of deal is reached.

Likely Borders, which employs 11,000, is working at the last minute to salvage some a partial solution, allowing some of its prime stores among the company's 259 superstores to be salvaged, reopening under another brand, like Books-A-Million, while the Borders brand completely closes.

Borders had set a deadline for 5 p.m. Sunday for offers as the company navigates through U.S. Bankruptcy Court, trying to avoid liquidation, but no offers were obtained. The company could still pull together a last minute deal, however, but it must do so in less than two days, as liquidation looms.

Should Borders fail in finding a bidder, Barnes and Noble would be left as America's only remaining true national chain.

Borders had appeared in the past two week to find a purchaser, but private-equity investor Najafi Co.'s $215 million offer for Borders is no longer on the table. The company's head, Jahm Najafi, told Bloomberg through e-mail response his company would not participate in the auction. Najafi's bid faced opposition in bankruptcy court from creditors who feared his company planned only to liquidate Borders.

Najafi says he tried to remove a clause in his offer allowing him to liquidate Borders to satisfy creditors by working with large U.S. publishers to get satisfactory shipping terms for new product, but at least one would not agree, and Najafi says he hs backed off completely -- leaving Borders facing liquidation if another buyer is not found immediately.

Borders Group President Mike Edwards told the Wall Street Journal Sunday in an interview the retailer had received some inquiries over the weekend. Hopefully we'll see a positive outcome, he said.

if not, liquidators led by Hilco Merchant Resources and Gordon Brothers Retail Partners LLC are the opening bidders for the auction in bankruptcy court. From its initial Chapter 11 bankruptcy filing, Borders had pursued a dual-track process allowing the company to seek buyers to keep the bookstore chain open, while proceeding with a sale to liquidators if that did not occur.

Without an offer by Borders' 5 p.m. Sunday deadline, the company moved closer to liquidation -- as currently that's the only remaining option.

Borders began with a single store in 1971, and the company grew to more than 1,000 bookstores nationally before it began closing stores a few years ago. Borders currently has 405 stores, after closing more 200 this this year.

Brick-and-mortar bookstores have struggled since the recession and the fast growth of digital books. Late last year Barnes and Noble, America's largest bookstore chain, said it was in discussions for a possible sale and looking at other strategic options for the future since it was losing money as buyers pulled away from hardcover books, the most lucrative product brick-and-mortar stores have traditionally sold.

Borders has struggled for years. The company opted for a decade to avoid developing its own online bookstore, as did Barnes and Noble, America's largest bookstore chain, partnering for many years with Amazon instead before launching its own online bookstore in the past year. That move was viewed by many industry observers as costly to Borders' future.

Borders also never entered the market with a digital reader as did Barnes and Noble with its Nook.

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