Borders, the nation's second-largest bookseller, said Thursday that it may put itself up for sale and that it has lined up $42.5-million in financing to help it continue operations.
Shares tumbled more than 28 percent, or $2.03, to close at $5.07 in volatile trading Thursday while analysts wondered whether Barnes & Noble would be interested in a purchase of its weaker rival.
Borders, based in Ann Arbor, Mich., has lost market share both to online retailers and to discounters like Wal-Mart, and its possible sale was given mixed prospects by industry analysts.
The operations financing announced Thursday comes from hedge fund Pershing Square Capital Management LP, its largest shareholder, and includes an offer to buy Borders' international businesses.
"This will be a challenging year for retailers due to continued uncertainty in the economic environment," said Borders CEO George Jones. "Looking forward to 2008 and beyond, the company determined that additional capital was required."
In the Tampa Bay area, where Borders and its mall-based spinoff Waldenbooks have 10 locations and employ about 300 people, customers worried that the store is in trouble.
"That's a bummer," said Dave Corrigan, 43, of Seminole as he left the Borders store at Tyrone Square Mall in St. Petersburg. "A lot of the appeal is just being able to see other books. I really like James Patterson, and I can see what else he writes. It's harder to do that on the Internet.
"And I just like the feel of Borders more than Barnes & Noble."
Steve Hindman, 57, of Sarasota was more pragmatic. He prefers brick-and-mortar bookstores to shopping online. "I've heard stories about eBay," he said. "But with gas prices going up, sometimes it's cheaper to order online. You're better off paying the shipping."
Hindman, who had bought a book about fishing tackle, glanced over his shoulder at the store. "I'd really hate to see all the employees lose their jobs," he said.
For now, that's not the plan. Borders Group Inc. said it is reviewing a wide range of possibilities, including the sale of only part of the company or certain divisions. A spokeswoman for the company said there are no store closures associated with Thursday's announcement.
"In the economic environment, we believe we're on the right track and our plan is the right one to get us there," CEO Jones told analysts in a conference call. "Now we have the flexibility necessary to get us where we need to be."
Credit Suisse analyst Gary Balter expressed some doubts. "We see little opportunity in the near term for Borders to be sold, with the No. 1 candidate Barnes & Noble not likely to pursue a deal at this price," Balter wrote in a note to investors.
Barnes & Noble Inc., the nation's largest bookseller, on Thursday said fourth-quarter profit declined 9 percent.
Barnes & Noble told investors during a conference call that it has not been approached by Borders' bankers, but if it were, it would take a look at its rival.
Times staff writer Tom Zucco contributed to this report,
which includes information
from the Associated Press.