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Essay / Research Paper Abstract
A 4 page paper discussing the terms of Borders’ proposed acquisition of its small competitor. There are several approaches that Borders can take in financing its hypothetical acquisition of Books-A-Million. Regardless of the route it chooses, it will need to ensure that the method used does not further erode its delicately-balanced ratio of assets to liabilities. Borders can choose to pay in any combination of stock, debt and cash, giving it the ability to be quite flexible in negotiating to buy Books-A-Million. Bibliography lists 3 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSfinBordBAM.rtf
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Unformatted sample text from the term paper:
a popular means of growth in recent years. The acquisition of a company in the same industry can remove a competitor while increasing total returns the new entity is
able to gain. Not many companies favor purely organic growth in todays business environment, and this includes Borders. Several years ago, it acquired former competitor Waldenbooks in much
the same way. The purpose here is to assess pricing, financing and negotiation strategies were Borders to seek to acquire Books-A-Million. The companies Borders Group
Borders Group (NYSE:BRG) is a $3.73 billion book retailer operating 1,400 stores, most of which carry the Waldenbooks name. Far smaller than either one of its
leading competitors, Barnes and Noble and Amazon.com, Borders is profitable and carries relatively little debt. Even so, its financial position could be more attractive. Its quick ratio (assets
/ liabilities) is less than 1.0, which is much lower than it should be in a totally healthy company. Books-A-Million Borders seeks to
grow through acquisition, and its smaller competitor Books-A-Million (NASDAQ:BAMM) appears to be a likely target organization. The $442 million book retailer operates 200 stores and also sells books online.
Its $442 million in revenues in 2003 reflects a slight decline from revenues gained the year before. Proposed Acquisition Terms Pricing Though
stock prices for the leading three competitors in the industry are in the upper 20s to mid 30s, Books-A-Millions stock price is only $6.37, with a diluted EPS ratio of
only 0.435. In contrast, Borders EPS is 1.5. Books-A-Million has only 16 million shares outstanding. Market capitalization is $104.49 million; enterprise value is $158.13 million. With
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