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Bye Bye, Borders: Chain Shuttering All Remaining Stores

Borders is closing its 399 remaining stores and 11,000 employees are being laid off. In a statement, Borders Group President Mike Edwards said, “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution, and turbulent economy, have brought us to where we are now.”

Yesterday’s deadline for new bids on Borders came and went, with Phoenix-based venture capital firm Najafi “reluctantly” declining to submit a new bid and liquidation firms Hilco and Gordon Brothers the only bidders left at the table. It appears that discussions with Birmingham, Alabama-based bookstore chain Books-A-Million and other interested parties about last-minute arrangements just didn’t pan out.

Borders filed for bankruptcy in February and has already closed about 200 stores. A bidder didn’t step forward until early June, when Los Angeles-based venture capital firm The Gores Group expressed interest in about half of Borders’ remaining stores, at a price of around $200 million (that would have been just about $1 million per store). Then came more good news: Najafi Companies, which also owns direct marketing music, DVD and book club company Direct Brands, came forward as a second possible bidder.

Borders chose Najafi Companies as its stalking-horse bidder. Najafi would have kicked off the court-supervised auction with a starting bid of $215.1 million, plus the assumption of about $220 million worth of liabilities. But Borders’ lenders and creditors’ committee balked, saying they’d get more money–at least $252 million–from the liquidators, and they feared Najafi would liquidate the remaining stores anyway. Najafi had the chance to submit a new bid, but didn’t, and, well, here we are.

Here is Borders’ official statement, which first appeared in the WSJ’s Deal Journal and is not yet on Borders’ website. Deal Journal also has Edwards’ letter to Borders employees, which blames Borders’ bad end on “external forces.”

Borders Group to Submit Hilco and Gordon Brothers Proposal to Court for Approval

– Hilco and Gordon Brothers to purchase store assets of the business and administer liquidation process

– Borders extends gratitude to dedicated employees and loyal customers

Ann Arbor, July 18, 2011 – Borders Group reported today that, in accordance with the terms of its financing agreement, the Company will submit to the Court for approval the previously-announced proposal from Hilco and Gordon Brothers to purchase the store assets of the business and administer the liquidation process. Borders said that, in the absence of a formal proposal from a going concern bidder, it did not require an auction prior to presenting the proposal to the Court at a scheduled hearing on Thursday, July 21, 2011.

“Following the best efforts of all parties, we are saddened by this development,” said Borders Group President Mike Edwards. “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, eReader revolution, and turbulent economy, have brought us to where we are now,” he added.

“For decades, Borders stores have been destinations within our communities, places where people have sought knowledge, entertainment, and enlightenment and connected with others who share their passion. Everyone at Borders has helped millions of people discover new books, music, and movies, and we all take pride in the role Borders has played in our customers’ lives,” Edwards continued, “I extend a heartfelt thanks to all of our dedicated employees and our loyal customers.”

Borders currently operates 399 stores and employs approximately 10,700 employees. Subject to the Court’s approval, under the proposal, liquidation is expected to commence for some stores and facilities as soon as Friday, July 22, with a phased rollout of the program which is expected to conclude by the end of September. Borders intends to liquidate under Chapter 11 of the Bankruptcy Code and, as a result, Borders expects to be able to pay vendors in the ordinary course for all expenses incurred during the bankruptcy cases.

10 Responses to “Bye Bye, Borders: Chain Shuttering All Remaining Stores”

  1. Uplinger

    I am sad about Borders shutting down. I enjoyed the Borders near the town where I grew up very much and spent many happy hours there. But when people could buy romance books and other genres online for much less than at the stores it stopped making sense to go.

  2. Kristie Boman

    There is a lesson to be learned here.  The use of both Kindle/e-readers and online booksellers has shifted money from the pockets of local retailers to other coffers.  While Borders is a big-box store, it is at least a physical store with employees who live and work in our local communities.  When we cannibalize our local economies in an attempt to save money (online), we forget that the loss of one business such as this can indeed have a trickle-down affect.  

    1. The newly unemployed have less money to spend locally, which will logically affect other businesses.  I doubt that those left unemployed by such store closings will breeze into new jobs in the current economy.  While there are relatively few people left unemployed in one area by such a closing, the result is still a negative when it comes to purchasing power.

    2. Stores near the newly-closed businesses will not benefit from walk-in shoppers like they used to.  I often doubled up a trip with Borders with a visit to a store in the same block.  Will I make as many trips to that store now?  I doubt it.  

    3. Empty buildings (and I predict these large stores will be empty for some time) are eyesores.  They drive away business rather than attracting it (to nearby stores).

    I realize we now live in a world in which convenience is a factor in purchasing and time is a commodity.  However, I believe we need to continually consider the effects our purchasing decisions make on our local economies.  People who grew up in Michigan felt the pinch when the foreign automobile market boomed, and now (decades later) Michigan is limping along financially. It seems the general public didn’t transfer that lesson to other purchasing decisions.  We are now not just cannibalizing local economies to buy from China and Japan; now we have a plethora of places outside of our hometowns to purchase lower-priced goods.  Every time you buy NON-locally, you are making a financial choice to support someone else’s community over your own.  There is a point where convenience is outweighed by the (collective) negative impact of shopping non-locally.

  3. As someone who grew up in Chicago in the 80s, this is probaby a passing era that is sad knowing the younger generation will not experience the social connection with content. Many of you older people remember going to a record store and you go to the section where they have your favorite music and you meet someone there who also enjoy the same kind of music and yall connected. This was the same connection in bookstores.

    I met plenty of Mercantile Exchange professionals who gave me financial advice as I browse financial books, plenty of software programming peers as I browse web/programming books and plenty of dates reading fiction literature that was similiar to my interests. I owe my web/programming/mobile career to being able to run to the bookstore and browse books looking for a solution over the years.

    Today, it look like people will be downloading content to their eReader without the physical social connection, no physical stranger nearby who is a field expert who can really recommend the best books to get in depth information and no connection except text reviews and blind faith on what type of content to purchase.

    This is really a sad day in America and we are losing our real world social connection to content. Oh, well – at least they still have bookstores in Shibuya, Tokyo that I can take an 11 hour flight and go visit.

  4. Bcordts

    Borders, you will be missed. I have enjoyed every trip to your stores. I was a good customer, and always picked up something. Each week was a pleasant experience.