Takeover rumors & value spur Borders

Article Excerpt

BORDERS GROUP INC. $24 (New York symbol BGP; WSSF Rating: Average) rose recently on rumors that a group of private investors is preparing to launch a takeover bid for the company. It’s likely these investors see many of the same qualities in Borders that we see. In addition, the company has no controlling stockholder to oppose a takeover. Same-store sales at Borders’ domestic superstores continue to grow, up 2.2% between October 23, 2005 and January 8, 2006. Although same-store sales at its mall-based stores fell 2.6%, that beat earlier forecasts. Borders plans to convert more of its Waldenbooks outlets to the Borders Express format, which tend to generate more traffic and sales. That should also help spur this division’s sales growth. The stock now trades for 16.9 times the $1.42 a share that it will likely earn in the fiscal year ending January 31, 2006. Borders is also attractive at roughly 40% of its sales of $59 a share. The $0.40 dividend…

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