The Deal has confirmed that Barnes & Noble is considering a possible bid for Borders, according to a Barnes & Noble spokeswoman. The Wall Street Journal reported Wednesday that Barnes & Noble, the nation's largest book chain, has put together a team of executives and advisers to evaluate a possible acquisition of its largest competitor Borders.
Assuming Barnes & Noble were to buy Borders at a premium (also assuming antitrust issues do not impede a deal), Ackman -- who is Border's largest shareholder with an 18% stake, which could grow to 28.8% if he were to exercise recently obtained warrants -- could pad his pockets with either cash, Barnes & Noble stock or a possible combination of the two. And based on the meteoric rise of Borders' shares on the news by 12.13% to $7.12 per share in late morning trading Wednesday, shareholders are optimistic about a premium deal. Ackman could use a little boost in his Borders' investment as its shares traded just over $20 when he first announced an 11% stake in late October 2006.
Ackman is also the second-largest shareholder at Barnes & Noble with an 11.3% stake. Barnes & Noble stock has traded between just over $42 when he first announced an 8% stake in early November 2006 and about $34 when he announced his last major purchase in late September 2007. Its shares uncharacteristically ticked up in late-morning trading Wednesday by 1.97% to $30.54.
Ackman could be getting a sale without even pushing for one. Ackman's most recent move at Borders was a late-March commitment to lend the liquidity-squeezed company $42.5 million. As part of the loan, Borders could sell its Paperchase stationary chain as well as operations in Australia, New Zealand and Singapore and a 17% stake in its U.K.-based Bookshop. If Pershing buys these assets, the price tag would be $125 million minus any debt. Pershing also received the aforementioned warrants to buy an additional stake in Borders at $7 a share. - Michael Rudnick
Headline-grabbing activist William Ackman of hedge fund Pershing Square Capital Management LP may stand to grab more than just headlines if a Barnes & Noble Inc. acquisition of Borders Group Inc. were to materialize. 
