Borders shareholders are trying to by much larger Barnes and Nobles.

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In a Bind

Borders and Barnes & Noble are big but under pressure.

A major shareholder of Borders Group Inc. proposed that the bookseller acquire much bigger rival Barnes & Noble Inc., in a gamble to unite the two giant but struggling retailers at a time of major tumult in the book industry.

The past year has been rocky for Barnes & Noble. In November 2009, the company adopted a “poison pill” antitakeover defense after activist investor Ronald Burkle and his Yucaipa Cos. purchased nearly 20% of its stock. In August, the retailer put itself up for sale. Mr. Burkle launched a nasty proxy fight for board representation, a bid that was defeated in late September.

So far, Borders hasn’t been part of the sales process for Barnes & Noble. The company hasn’t signed confidentiality and standstill agreements, which all interested parties have been required to enter if they want access to Barnes & Noble’s financial information to conduct due diligence, people familiar with the matter said. Because of Barnes & Noble’s poison pill, it would be difficult for Borders to mount a hostile campaign.


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