The end is very near for Borders, as America's second largest bookstore chain is fast approaching liquidation after no new bids emerged Monday.
The company is in negotiations to sell a small number of its stores to Books-A-Million, the Birmingham, Alabama chain, but the number involves less than 50 stores if a deal can be reached.
All that remains unless a last-second bid comes through at the last second for the bankrupt, Ann Arbor, Michigan-based bookseller is the opening bid from two liquidators.
If no new bids emerge for Borders by Tuesday, an auction in U.S. Bankruptcy Court in Manhattan will be canceled and a final court approval hearing on the bid from the two liquidator companies will be held Thursday, all but ending America's second largest bookstore chain.
Borders was among the pioneers of the big box book retailers, growing in the 1990s to more than 1,000 stores nationwide, but the company has lost money for five years despite shedding stores. Borders has 400 stores remaining including more than 200 superstores, but the future of all is now near at hand.
Borders filed for bankruptcy protection in February.
The company held out slim hope of finding some savior late into Monday of some sort of deal with Books-A-Million, which operates 231 stores in 23 states.
But it's not likely those discussions, or any 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. Also, a deal does not appear likely as only a day remains before the court must proceed with the liquidation bid.
Borders employs 11,000, and the company's stores are spread throughout the country in malls and other prime real estate locations. Borders stores average about 25,000 square feet, or half the size of a football field, so the sudden departure of 400 locations will create large empty spaces in many properties.
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 a day essentially, 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.