Borders heads to liquidation after deal falls apart overnight

NEW YORK — Borders Group, the nation's second-largest book store chain that once operated more than 1,000 stores, appeared headed for liquidation after a judge on Thursday approved its motion to auction itself off, with a team of liquidators as its opening bid.

The move came after an offer made earlier this month from Najafi Cos., a private-equity investor, disintegrated overnight.

Borders said it would accept bids until 5 p.m. Sunday and give notice by Monday if no other bidder emerges.

Earlier this month, the private-equity investor from Phoenix offered $215 million for the company, plus the assumption of $220 million in debt. But on Wednesday, creditors objected, saying the agreement would not prevent Najafi Cos. from taking possession of the company and liquidating it immediately for profit. Landlords also objected.

Creditors said a bid from liquidators Hilco Merchant Resources and Gordon Brothers is stronger. They think it would pay out $252 million to $284 million in cash.

Creditors said in a court filing they were hopeful Najafi would submit a higher bid, but Najafi stood by its original offer.

Meanwhile, one analyst speculated that if Borders liquidates, that could spark a higher bid for its chief rival, Barnes & Noble. Financier John Malone's Liberty Media made a $1 billion offer to buy Barnes & Noble in May.

Liberty Media has said it values Barnes & Noble for both its Nook e-reader business and its retail stores, so a full liquidation of Borders would increase the value of the retail side of the business, Janney Capital Markets analyst David Strasser said.

"This is perhaps an opportunity for a higher negotiated bid via Liberty or an entrance of another bidder," he wrote in a note.