Tiny Borders Looks to Buy Mighty Barnes & Noble

A major Borders shareholder is offering to finance a $960 million bid to buy much larger rival Barnes & Noble. That would amount to $16 a share, unlikely to be the highest bid for the bookseller, which put itself on the block in August. Sources tell the Wall Street Journal that eight to 10 private-equity firms are preparing bids, likely driving the price to at least $20 a share. But there could be significant cost savings in combining the nation’s top two booksellers.

The deal would look mighty strange on paper, since Barnes & Noble is drastically bigger than its potential buyer, with $865 million in market capitalization to Borders’ $100 million. The offer comes from a hedge fund managed by William Ackman, which owns 37.3% of Borders. Ackman proposed a merger of the companies two years ago as well, but Barnes & Noble demurred, unwilling to take on Borders’ real estate portfolio.