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Borders looks to buyer, beyond

DETROIT – Direct Brands plans a $215 million opening bid for Borders Group, the nation’s second-largest bookseller, in a bankruptcy court auction.

Once sold, likely later this month, the Ann Arbor, Mich.-based bookseller will morph into something different, said turnaround expert Jim McTevia of Bingham Farms, Mich.-based McTevia & Associates.

“This should have been done long before Borders ended up in bankruptcy,” he said.

“An equity firm has to do this and dump all the assets they don’t want. What is left is probably going to be a viable operating company, but not anywhere near what it is today.”

The bookseller said last week it has an asset purchase agreement with Direct Brands, a company of Phoenix-based Najafi Companies, a private equity firm with $1.1 billion in assets.

Direct Brands would start the bidding and other bidders would be able to offer more through an auction in U.S. Bankruptcy Court in Manhattan. In addition to buying most of Borders assets, Direct Brands has offered to assume $220 million in liabilities.

Direct Brands, which includes Book-of-the-Month Club, Doubleday Book Clubs and Columbia House, was acquired by Najafi Companies in 2008. It plans to file a tentative purchase agreement before a court hearing on July 21.

Borders would operate as a wholly owned subsidiary of Direct Brands, if the deal gains court approval.

“We are pleased to take another important step forward as we position Borders for a vibrant future and sustainable earnings growth,” said Mike Edwards, Borders Group president.

Traditional bookselling is an industry in transition as fewer people purchase their media in bricks-and-mortar locations.

Whoever buys Borders would likely reduce its physical locations, and focus more on selling through Borders.com and other avenues, McTevia said.