The Borders and Angus & Robertson book chains are nearing total collapse, as administrator Ferrier Hodgson “urgently” calls for offers after failing to reach a deal with creditors.
The operations will close if a buyer for REDgroup Retail does not emerge, Ferrier Hodgson has warned, after failing to reach a deed of company arrangement that would have allowed it to keep trading while repaying part of its debt load.
Ferrier’s inability to find a suitable buyer raises questions about the health of Australia’s book industry, which has voiced concerns that the strong Australian dollar is luring shoppers online. But industry sources also point to the administrator’s ability to sell seven Borders and Whitcoulls New Zealand stores recently as a sign that buyers can be found.
Don Grover, CEO of the Dymocks Group of Companies, says the bookseller is interested in some of the assets. “We’ve got some opportunity for some geographic expansion so we’d like to look at where they sit,” Grover said. “But only where it fits in with our strategy.”
Another obvious potential buyer for the distressed business is franchisee-owned Collins Booksellers, which told SmartCompany a month ago that it was aware of the business opportunity and considering its options.
Collins Booksellers chief Daniel Jordon declined to comment this morning. The company has about 5% market share.
Tim Coronel, publisher at Thorpe-Bowker, says he understands that some bookselling chains have made offers for some specific locations and parts of the REDgroup business.
An industry source said Ferrier Hodgson was confident throughout its appointment a deed of company arrangement would be signed. The administrator did not respond before publication.
Some 17 Borders stores and 55 Angus & Robertson stores have been closed since Ferrier Hodgson was appointed to the debt-laden Pacific Equity Partners-owned business in February.
Employee numbers have been whittled down from more than 2,000 since Ferrier’s appointment; the most recent sackings came yesterday with the loss of 34 head office jobs.
Shortly after Ferrier’s appointment, 25 Angus & Robertson stores sought to break away from REDGroup, saying they no longer received the benefits of operating as franchises, and the administrator’s decision to not fully honour gift cards had hurt their individual stores.
Ferrier Hodgson responded with legal action, saying it strongly believed the franchisees did not have the right to break their franchise agreement. A ceasefire was signed last month, with the breakaway stores agreeing to continue trading as franchised stores although expressing a desire to operate as independent entities.
The fate of these breakaway franchisees is unclear if Angus & Robertson is shut down.
Publisher Tim Coronel says if the 50-odd A&R franchisees run their stores well, they might well be able to continue to run as independent booksellers.
Coronel says publishers and book distributors “have already taken a hit from the initial losses incurred when RedGroup went into administration and with the loss of shelf-space in the A&R and Borders branch closures to date.”
“If there are more store closures, publishers and book distributors – who are already experiencing some very tough market conditions throughout the book trade – will have lost an essential route to get their books in front of the reading public.”
And Emmett Stinson, Lecturer in Publishing and Communications at the University of Melbourne and president of a small presses advocacy group, says publishers have reported that print runs are only 80% of what they were 18 months ago, while other figures have shown the overall volume of book industry production actually increased by 4% last year.
“We’re in an environment where fewer books are going to be sold. They are part of consumers’ discretionary spend and when their store closes, consumers don’t buy books. They buy something else,” Stinson says.
REDgroup Retail sales were $370.7 million for the year to August 2010, with Borders listed as having $177 million in sales and Angus & Robertson $143 million.
In March, the company was estimated by management to have about 20% of the retail book market. Creditors include a subsidiary connected with REDgroup’s private-equity owner, publishers and landlords.
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