Hedge fund financier acknowledges $125 million loss on Borders investment

AnnArborDOTcom: "One of the top investors in Ann Arbor-based Borders Group Inc. acknowledged that his New York-based hedge fund has lost $125 million on its investment in the book store chain, Bloomberg BusinessWeek is reporting. Activist investor Bill Ackman of Pershing Square Capital Management 'admits' the Borders investment was a mistake, the magazine says in a lengthy profile story. ... "

More Insight re: Borders' Buyout Bid for Barnes & Noble

DailyFinance:

... even though it's Ackman in the news as the leading figure in the buyout, the tactics have Borders chairman and CEO Bennett LeBow written all over them. LeBow muscled his way into Borders' top position by acquiring a considerable amount of stock and warrants that, when they came due, gave him a 35% stake in the company.

Past precedent shows that LeBow's modus operandi with companies is to buy his way into one, use it in an attempt to buy a bigger company, and sink both businesses in the process. In fact, the potential B&N-Borders merger echoes another M&A disaster from the late 1980s: The LeBow-controlled MAI Basic Four attempted to buy larger competitor Prime Computer in a hostile takeover bid. Things didn't end up so well for either company, as they both ended up filing for Chapter 11 bankruptcy, and LeBow was out of the computer business entirely by 1995.

The timing of Ackman's announcement is also noteworthy. On Dec. 9 -- the last day possible before the SEC starts asking uncomfortable questions about the company's financial status -- Borders will report its third quarter earnings. They're expected to be anemic, certainly much more so than Barnes and Noble's quarterly earnings, which were reported last week and weren't exactly fabulous either. Talk of a merger would certainly wake up otherwise sleepy investors who need all the help they can get to be excited about Borders' future, which even a spectacular holiday season won't be able to turn around. (And indeed, the merger talk has awakened investors: Barnes & Noble shares were trading Monday morning at $2.39, up 18%, at $15.60. BGP stock is up 19 cents, or 18%, at $1.27.) ...

Just Nuts: Titanic Rushing to Join Forces with the Andrea Doria - Borders to Buy Barnes & Noble?

The Dividend Daily: "Book retailer Barnes & Noble, Inc. (BKS) on Monday saw its shares soar in premarket trading following the news that Bill Ackman’s Pershing Square Capital hedge fund is willing to finance a $16 per-share cash bid for the company from rival Borders Group (BGP). That $16 bid would represent a 20% premium to BKS’ Friday closing price of $13.28. Ackman also noted he would finance a cash/stock combination offer for BKS from BGP, should both parties prefer to go that route. Barnes & Noble shares soared $2.27, or 17%, in premarket trading Monday."