Bloomberg News

Najafi Said to Consider Buying Borders Out of Bankruptcy

June 08, 2011

(Updates with Najafi’s U.S. acquisition in fourth paragraph.)

June 8 (Bloomberg) -- Najafi Cos., a private equity firm, is considering buying Borders Group Inc., the bankrupt book store chain, according to a person familiar with the matter.

Najafi is performing due diligence, the person said. Gores Group LLC, the Los Angeles-based private-equity firm, is bidding for at least half of Borders’s stores, another person familiar with the matter said June 1.

Borders, based in Ann Arbor, Michigan, was founded 40 years ago as a single used bookstore. The company, the second-largest book chain after Barnes & Noble Inc., had 642 stores in February when it filed for court protection and, after closing 237 of them, has 405 still operating. Under Chapter 11 of the bankruptcy code, the company would hold an auction to sell itself, and find the best deal to repay its creditors.

Najafi, based in Phoenix, bought the French Direct Group Business of CD and DVD clubs from Bertelsmann AG, Europe’s biggest media company, in May, and bought its North American Direct Group division in 2008.

Najafi is “actively evaluating additional opportunities in this space,” said spokesman Greg Sexton in an e-mailed statement. Najafi declined to comment on Borders, and said the Bertelsmann France unit has about $1 billion in revenue and complements its earlier acquisition of the U.S. marketer of books and DVDs.

Borders Creditors

The interest from Najafi as well as from Gores bodes well for Borders’ creditors, and many stores could still be liquidated depending on the acquirer’s digital strategy, said Schuyler Carroll, a partner at Perkins Coie LLP in New York who specializes in bankruptcy.

“Borders would be a good outlet for Najafi considering the Bertelsmann assets,” Carroll said. “You have to have some strategy for buying Borders. The younger generation doesn’t walk into a bookstore to buy a book.”

Borders bankruptcy lawyer Andrew K. Glenn and Borders’ creditor lawyer Bruce Buechler didn’t return calls for comment.

“The sale process has become significantly more robust,” Glenn said in Manhattan court June 2. He said he couldn’t discuss details of the offers and that the company hopes to complete a sale in two to four weeks.

Najafi’s potential bid was reported yesterday by the Wall Street Journal.

The case is In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance from Karen Gullo and Serena Saitto in New York. Editor: John Pickering

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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