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Is Borders on the brink?

By | Published on Tuesday 24 November 2009

Borders UK is back on the market just four months after it was acquired as part of a management buy out backed by Valco Capital Partners.

You might remember that Ernst & Young, the book and music sellers’ auditors, questioned the commercial viability of the UK Borders business back in August, shortly after the MBO that changed the company’s ownership. It seems they were right to do so, with the chain’s current backers now looking to bail.

But the Ernst & Young report, coupled with news at least one publisher is now refusing to supply the bookseller over credit concerns, has led many to speculate a buyer won’t be found and Borders will be the latest brand to disappear off the high street. Both HMV and WH Smiths expressed interest in taking over the chain, but talks with both seemingly broke off without conclusion. The company’s financial advisors subsequently announced the firm was up for sale in an ad in the Financial Times.

Borders management have said little about the sale, though CEO Philip Downer reportedly told staff in a memo last week that they had “received an unsolicited approach from an interested party”, and that the company had therefore “retained a corporate finance specialist to investigate future possibilities for the business, in line with best practice”.

Downer has always stood by the viability of the company since he led the aforementioned management buy out, and was speaking optimistically about the firm’s future as recently as last month. But an increasing number of commentators now seem convinced Borders will be one of a number of retailers to go under in the run up to or shortly after Christmas. The bloke I sat next to on Radio 5Live’s ‘Wake Up To Money’ yesterday reckoned fifteen big retailers will go out of business in the next quarter, Borders most likely among them.