Borders wants to buy Barnes & Noble: Really?

Here’s my reaction (via RetailWire) to the news that Borders and its “activist” lead investor William Ackman want to take a run at its much bigger and (relatively) healthier competitor, Barnes & Noble:

This reminds me of the 2004 “merger” of Kmart and Sears, in which the much smaller and weaker company had the financial resources to swallow up a retail giant. Without turning this into another exercise in Sears-bashing, the results speak for themselves, because the combination of two weak players does not usually result in a win. (Compare this to the Macys/May merger, in which the two industry leaders formed a stronger company over the long run.)

The parallel to Sears Holding extends to the company management: Eddie Lampert was a celebrated financial wizard who has not shown aptitude for running a retail business over the past six years. Likewise, William Ackman is a noted hedge fund manager who has parlayed his investments in several retail companies into a reputation as an “activist investor,” but without much of a track record of management or results to show for it.

There is one key difference worth pointing out: B&N and Borders are the “last ones standing” in the bricks and mortar bookselling industry. (The real competition is from e-commerce and digital books.) Some consolidation seems inevitable, but is Borders the company that can pull it off? And how does the business model avoid becoming another Blockbuster?

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