Direct Brands’ Borders Bid Rejected

14 Jul, 2011 By: Chris Tribbey

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Borders Group moved closer to liquidation July 14 after a takeover bid by Direct Brands, parent of mail-order disc service Columbia House, was rejected.

In a bankruptcy court filing July 13, a committee representing the bankrupt retailers’ creditors rejected the proposed takeover,

“The committee … does not believe that [Direct Brands’ proposal] as currently structured, represents the highest and best bid or that the proposed bid procedures are designed to maximize the potential value of the debtors’ assets,” the filing reads. “The committee would fully support the bid procedures [if the agreement] was modified to, among other things, embody a firm commitment to provide for a going concern sale of the debtors’ assets. Unfortunately, it does not.”

Direct Brands’ parent company Najafi Cos. stressed that its intentions with its bid, which included the bookstore company’s assets for $215.1 million plus $220 million of liabilities, was to “keep Borders intact and to provide the best long-term outcome for Borders’ loyal customers, publishers, employees and the entire book industry.”

“We regret to confirm that Direct Brand’s proposed agreement to keep Borders operating is no longer supported by the deciding parties,” Najafi Cos. said in a statement. “The deciding parties’ legal team and financial advisors have elected another option, which is in contrast to what we had envisioned for the future of Borders. However, we remain willing, ready and able to move forward should the deciding parties instead choose to work with us and our existing offer.”

In an internal memo obtained by The New York Times, Borders president Mike Edwards told employees that the company was moving forward with a proposed takeover by a group of liquidators. Should that group, led by Hilco Merchant Resources and Gordon Brothers Group, come out on top in a July 19 court auction, Borders would likely cease operations.

“While we regret Najafi’s withdrawal … we remain hopeful that they or other potential bidders who are interested in operating Borders as a going concern will choose to participate in the auction process on July 19,” Edwards wrote.

“In the meantime, as the process moves forward, we will continue to conduct business as usual. Our stores remain open, and Borders.com is fulfilling orders as usual. It’s important that we all stay focused recognizing that media speculation will no doubt continue.”

Since filing for bankruptcy in February, the retailer has closed roughly a third of its 640-plus stores.
 

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