Sadly, though, any merger of the two giant bookstore chains will result in the existence of fewer bookstores because of the overlap in territory that the two chains share today. I suspect that would mean longer lines and fewer book choices for most of us.
...a combined Borders / Barnes & Noble would sell about $8.5 billion. What is being overlooked here is the # of duplicate stores that would need to be closed, affecting total sales. This is not a 1+1=2 equation. This is more of a 1+1=1.5 equation.But there is now some speculation that a merger of Borders and Barnes & Noble is not as likely because of a recent FTC decision to oppose another proposed merger of similar giants.
What would be improved from the merger would be profitability, rather that size. Borders is currently going downhill fast, and has not had a profitable quarter in over a year now. Cash flow, negative in 2004 and 2005, was positive in 2006 only because of $317 million in borrowing. Borders need to merge to survive, not create a powerhouse. With national bookstore sales declining and less than 10% of its books sold online (Borders jointly owns its site with Amazon), a Barnes & Noble-Borders combination is not going to challenge Amazon anytime soon, it just assures they survive.
The firm (Goldman Sachs) believes a merger with Barnes & Noble (BKS) is less likely following the FTC's decision to oppose the Whole Foods Market (WFMI) and Wild Oats Markets (OATS) deal.But here's the kicker:
Heck, if they just wait long enough, Borders will probably go under and Barnes & Noble can just pick it up on the cheap.Honestly, I never would have dreamed that Borders or Barnes & Noble would be in this predicament. It all makes me wonder now that they have grown so large, with so many locations, whether or not they will ever have the volume and the margins to cover all the expenses involved with that kind of growth. Would they have been better off by settling for fewer stores and less "dominance" of the market? Is it easier for a chain like Books-A-Million to make it with fewer stores?