Borders UK collapses into administration

The retailer has appointed Philip Duffy, Geoff Bouchier and David Whitehouse as joint administrators of the book-store chain. The collapse affects some 1,150 employees.

Duffy said: “All stores currently remain open for business as normal whilst the administrators undertake a review of the company’s affairs and seek a purchaser for all or some of the company’s stores in which there has already been interest.”

“All outstanding employee wages have been paid up to date and ongoing wages for retained staff will continue to be paid as an expense of the administration.”

“The appointment of MCR as administrators to the business is indicative of the weakening position of book retailers in the current market with competition on bestsellers from supermarkets and the growing strength of the digital and on-line markets in this sector,” he added.

Borders has been teetering on the brink of collapse since last week when, as revealed by Retail Week, sale talks with potential buyer WHSmith broke down. BDO had been waiting in the wings as administrator but has withdrawn because of a conflict of intrerest, it emerged this morning.

A BDO spokeswoman said: “BDO has robust and thorough processes in place to identify the risks involved in taking on any client appointment. In this instance, these checks uncovered a conflict which has prevented BDO from being able to act as administrators to Borders UK.”

Borders UK had found it difficult to compete with online booksellers such as Amazon, and supermarkets encroaching on its patch and undercutting its prices. Last year it was also hit by the withdrawal of some of its credit insurance.

As well as WHSmith, Borders is thought to have been talking to HMV, owner of the Waterstone’s chain, about a deal.

In July, Borders UK chief executive Philip Downer Borders led a management buyout backed by Valco Capital Partners, the private equity arm of restructuring firm Hilco. The bookseller had already sold off some stores – including its flagship on London’s Oxford Street – and the management were confident the chain had a future.

On Monday, Borders UK stopped taking orders on its website and at least three publishers were understood to have stopped supplying the retailer for fear of its pending collapse.

The bookseller’s fall could leave £100m a year of book sales up for grabs for competitors to battle over.

Oriel Securities analyst Ben Hunt said Waterstone’s owner HMV could particularly benefit if Borders collapsed.

He said: “Borders is estimated to make UK book sales of circa £100m this year. That there is a Waterstone’s located near each of the 35 Borders stores bodes well in terms of picking up maximum market share.”

He said that WHSmith could pick up an incremental £3m to £4m of operating profit.

Borders UK first opened in the UK in 1998 and was bought from its US parent in 2007 by Luke Johnson’s Risk Capital. It has 45 shops, including its Books Etc fascia.