PEOPLE who were there described the meeting with Borders Group as something akin to a corporate intervention. The book seller was in trouble and some friends tried to get it back on the straight and narrow.
The friends in this case were shareholders who happened to own a cumulative 25 percent of the company’s stock. And these holders pulled Borders management into a private meeting in January in New York to say that they wanted more effort, better decisions and – ultimately – a renewed effort to sell the company.
And, what do you know, management didn’t seem to fight, squawk or act oppressed. Borders Chief Executive Greg Josefowicz cooperated.
Borders stock is up nicely in the last few weeks in spite of the fact that the rest of the stock market looks like death.
The company’s shares were selling at just $11.38 on Dec. 27 and had only crawled their way up to $12 around the time of the shareholder move. Yesterday, the stock closed at $17.10, up 50 cents
“It was cordial yet firm,” said Alan Lafer of Lafer Management Corp., who arranged the meeting. “We said, ‘You can’t act the way you are acting. You have to be more aggressive with your business plan.'”
Josefowicz agrees that the meeting was productive.
“Some of the conversation helped us understand the perspective of the shareholders,” he said, adding that the meeting was “very” useful. “I would hope that both parties feel that way.” Here’s how Borders was acting.
This time last year, the Ann Arbor, Mich.-based book-selling company hired Merrill Lynch to find a buyer for the company. Then, in July, the company announced that it ended sale talks.
None of the buyers were officially named, although buyout firms like Bain Capital Inc., Apollo Management L.P. and Blackstone Group L.P. were said to be considering bids. Borders’ stock plummeted when the talks ended.
And a lot of the shareholders who thought they were investing in an interesting acquisition situation were suddenly holding shares in a company that was spending too much on Internet development and too little time on its brick-and-mortar business.
“They didn’t lose any money, but their growth stalled,” said Lafer.
Borders apparently got the message.
In recent days the company signed an agreement to allow Ingram Book Group to handle fulfillment services for special orders and Internet sales, cutting down sharply on Borders’ resources going to the ‘Net.
And the company reiterated its desire to buy back its own shares, because it believes they are inexpensive.
There will be more such deals, say insiders. And while none of them will be considered a blockbuster, analysts think they see the goal line – another attempt to sell the company once the mess is straightened out.
Josefowicz will only say that he wants to increase shareholder value and that no option “has been forever dismissed.”
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Tyson Foods has speculators on Wall Street cow-ering.
Very early this year, Tyson agreed to buy cattle company IBP Inc. for $30 a share. No sooner were the documents signs than IBP disclosed that it was having trouble with some of its accounting and that the Securities and Exchange Commission was looking into the matter.
I’d been following this situation since before the Tyson deal was announced. And when IBP confessed to the accounting problems I opined that Tyson would pull out of the IBP acquisition.
A source of mine who was close to the bidding process said Tyson would merely play a game of chicken and that it really didn’t have any beef with IBP.
Last week Wall Street came a little closer to my point of view.
On March 13, IBP filed documents with the SEC saying that its profits would not meet expectations. The next day Tyson said it was “disappointed” with that disclosure and added, “It is still too early to determine what effect these issues will have on the transaction structure.”
Speculators were happy that the wording of that statement indicated there was still a “transaction structure” to worry about. And they are optimistic that Tyson will still be willing to pay $25 a share.
But the whole mess was bothering them enough that they sold IBP’s stock down to $23.80 a share. That’s off a high of $28.82 on Jan. 19.
The stock jumped $1.35 after IBP said it expected Tyson to proceed with the deal. Tyson, however, didn’t comment.
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How much lower can the Nasdaq go? If history is any indicator, another 36 percent, to around 1,200. Thomson Financial, which tracks corporate earnings through its I/B/E/S unit, calculates that since 1992, the price-to-earnings ratio of over-the-counter stocks averaged around 29.7.
Even with the Nasdaq’s recent drop under 2,000, the index is still selling at a PE of 48.6. “What’s worse, we anticipate more earnings warnings on the horizon, concentrated within technology,” says Joe Kalinowski, equity strategist for I/B/E/S.
If the E – earnings – comes down at lot more, the Nasdaq would obviously have to go under 1,200 to get back to its historic norm. And there is also the chance that the index could go below the average – but neither I nor Kalinowski have the heart to explore that possibility.
* Please send e-mail to: jcrudele@nypost.com