Borders may put 72 UK stores up for sale

Borders may put 72 UK book stores up for sale

By Karen Attwood

Published: 23 March 2007 Independent

Borders is considering the sale of its UK book stores, which have been struggling in the face of competition from supermarkets and online retailers.

Borders, the second largest bookseller in the US, has hired Merrill Lynch to look at its UK operations as part of a wider strategic review of its international business, including Australia and New Zealand.

Earlier this year, Borders said it was committed to investment in the UK. It told a competition commission inquiry into HMV's acquisition of Ottakar's last year that it was looking to expand its superstore format in the UK, with plans to open about seven stores each year for the next seven years.

However, the competition from the supermarkets and internet appears to have proved too much. Its overseas arm, 70 per cent of which is UK business, made losses of $500,000 (£254,000) in the year to 3 February, compared with profits of $11.9m a year earlier.

Borders said it wants to focus on its US superstore business but it will also keep hold of its gift and stationery business Paperchase, the UK chain it bought in 2004, its franchise operations in Malaysia and Dubai and its stores in Puerto Rico. In the US, the company has been hit by charges linked to closures at Waldenbooks.

The chief executive, George Jones, said the company must significantly reduce its investment in the international segment in order to achieve its goals in the US.

The UK division could be sold, or franchise or licensing partners could be found, a company spokeswoman said.

Given the difficult climate in the UK, analysts were at a loss to come up with a likely trade buyer.

Matthew McEachran, a retail analyst at Kaupthing Singer & Friedlander, said: "It's been a very tough market for specialists and a lot of the trade players have their hands full."

WH Smith would struggle to buy it given its current market share, he added. HMV is the biggest player, having added Ottakar's to its Waterstone's chain. The group holds about 25 per cent of the market share, while WH Smith has about 16 per cent and Borders about 7 per cent.

However, HMV has issued a string of profits warnings in recent months and has announced a rescue plan which could see the closure of up to 30 Waterstone's stores.

Analysts said private equity was the most likely buyer, and suggested that Barnes & Noble, the No 1 chain in the US, might have a look. Borders entered the UK only in 1998 when it bought the Books Etc chain and operates from 42 Borders superstores across the country, along with 30 Books Etc and Borders Express airport stores. It employs more than 2,000 people.