Borders to shut down for good after deal collapses
Greta Guest / Detroit Free Press
Borders Group, the 40-year-old retailer that started as a used bookstore in Ann Arbor, decided Monday to liquidate its remaining 399 stores, conceding a battle with competitors, technology and itself.
Started in 1971 by brothers Louis and Tom Borders as an 800-square-foot bookstore, its impending passing adds to a long list of Michigan-based retailers that lost their edge with consumers.
Borders was still growing its supply of massive superstores when people started shopping online. Then to replace lost book and music revenue, Borders started stocking more gifts, candy and impulse items. It also bought Paperchase stationery, stocking it in stores when e-mail had made handwritten letters a dying art.
It filed for Chapter 11 bankruptcy protection Feb. 16. A bid by Najafi Cos. fell apart last week and with no other takers, Borders had no choice, said Paul Magy, a Southfield-based attorney who represents 28 landlords with Borders stores.
“Borders really does want to continue, and I think they really do care about their employees,” Magy said.
Borders Group President Mike Edwards, in a statement, 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.”
Borders had difficulty adjusting to new world
Liquidation sales at Borders stores nationwide could start as soon as Friday, the company said Monday.
Borders Group threw in the towel after a bid to buy the company fell apart last week. It plans to submit a previously announced liquidation plan to the U.S. Bankruptcy Court in Manhattan on Thursday.
The Ann Arbor-based bookseller was trying to reorganize for five months, but was overwhelmed with debt, losses and changing consumer tastes.
“Following the best efforts of all parties, we are saddened by this development,” said Borders Group President Mike Edwards, in a statement.
Joe Lanier, a hairstylist from Southfield, was browsing books in the self-improvement section of the Borders at 13 Mile and Southfield on Monday evening and said news of the liquidation had brought him to the store with a $30 gift certificate from his family.
He called the demise of Borders “terrible.”
“I love going to the bookstore — leaving the kids and sneaking away, looking at the variety” of books, he said. “I hope someone can come through and buy them and bail them out.”
Barring any other bids, the court was expected on Thursday to consider the backup bid — a full chain liquidation led by Hilco Merchant Resources and Gordon Brothers Retail Partners. The liquidation plan drew several objections late Monday, including from landlords who say it violates landlord rights and protections under bankruptcy law. And Kobo, which makes Borders eReaders, said it has the right of first refusal for the 11% interest Borders owns in the company.
Najafi, a Phoenix-based private equity firm, offered $215 million in cash and other consideration earlier this month. Creditors objected to the bid last week, indicating that the bid from Hilco and Gordon Brothers would give creditors between $252 million and $284 million in cash. Najafi, which owns Book-of-the-Month Club, Doubleday Book Clubs and Columbia House, seemed like a good fit to operate Borders as a going concern.
Paul Magy, a Southfield-based attorney who represents 28 landlords with Borders stores and its headquarters, said there is still a possibility — no matter how small — that a bidder would step forward yet this week.
“It does look grim for anything other than a liquidation at this point,” Magy said. “That would be a very sad occurrence and the loss of a Michigan-based retailer and 11,000 jobs. It really is beyond Borders’ control right now.”
Borders now operates 399 stores and employs about 10,700 workers. It has 408 employees at its Ann Arbor headquarters and 473 at its 26 Michigan stores. It closed more than 200 stores in bankruptcy. Liquidating the remaining stores is expected to conclude in September, the company said in a statement.
“For decades, Borders stores have been destinations within our communities, places where people have sought knowledge, entertainment, enlightenment and connected with others who share their passion. Everyone at Borders has helped millions of people discover new books, music, movies, and we all take pride in the role Borders has played in our customers’ lives,” Edwards said. “I extend a heartfelt thanks to all of our dedicated employees and our loyal customers.”
Ann Arbor Councilwoman Sabra Briere said she was probably like a lot of Ann Arbor residents — resigned that the changes Borders began making long ago were the first steps toward its end.
The cozy bookstores that once served up staff who could point Briere to the 14th-Century music selection and other academic offerings she craved had morphed into impersonal franchise locations, where employees just “looked at me blankly when I asked” for such esoteric offerings, she said.
“I’m devastated,” by Borders’ end, “but I was devastated … years ago,” she said. “People cheapened what Borders had to offer, and when it wasn’t as splendid as it used to be, that became a reason not to shop there as much.”
She, too, began shopping online when she couldn’t find items in the Borders locations. She missed the “serendipitous” discovery of items she might not have been originally seeking, and found it easier to navigate Amazon.
John Hieftje, Ann Arbor mayor since 2000, said it’s time to focus now on finding tenants for the longtime downtown store. It’s in a prime downtown location and nearly 700 parking spaces in a new structure will make it even more marketable, he said.
“There’s an emotional loss to it, but from a business standpoint, it’s in a good location,” he said.
Turnaround expert Jim McTevia of Bingham Farms-based McTevia & Associates, said he isn’t worried about Ann Arbor.
“I think Ann Arbor is a vibrant community and will survive,” he said.
Magy said it is possible that Borders would keep a few stores open through the holidays. Most of the landlords gave Borders until Jan. 12 to decide whether it wanted to accept or reject the leases.
“My clients who have operating stores are very disappointed in this turn of events,” Magy said. “My clients were extremely cooperative with Borders.”
Ed Nakfoor, a Birmingham-based retail analyst, noted that a number of Michigan-based retailers, including Harmony House, Jacobson’s, Winkelman’s, Crowley’s, Hudson’s, Frank’s Nursery & Crafts and Sibley’s Shoes, were all known for their innovation and merchandising in the past. But they all lost the ability to adapt to economic realities.
Still, he wonders where he will buy specialty magazines such as the Wilson Quarterly once Borders is gone.
“The world cannot be one giant fulfillment center. It just can’t be,” he said. “There are a lot of naysayers who will say they didn’t change with the times. What’s to change? They are a bookstore. I would like to think there is an opportunity for a retailer to reinvent the bookstore. Perhaps that could be what Borders’ bankruptcy was about.”
Jeff Green, president and CEO of Jeff Green Partners in Phoenix, which specializes in retail real estate, said he thinks the next evolution of bookstores would be about 2,500 square feet — roughly 10% of the size of Borders superstores.
“I’m wondering if there will be a rise in independent bookstores and we’ll come full circle,” Green said.
The news seemed like a formality after the bid for Borders fell apart last week, said Laura Bartell, a bankruptcy law professor at Wayne State University. “The physical bookstore has become a thing of the past,” she said.