Link-up between Megastores and Borders chain mooted
Billionaire tycoon Sir Richard Branson is considering tabling an offer for bookseller Borders' UK division, Retail Week has learned. The deal would rapidly expand his entertainment retail business.

Branson is understood to have asked Merrill Lynch, the bank organising the disposal on behalf of Borders' US parent, for access to detailed information. Borders is expected to attract a price tag of about£50 million.

Branson, already a key player in the digital media sector, is attracted to the idea of complementing that by mirroring HMV's music-to-books entertainment retail model.

In addition to giving Branson another avenue for music sales, Borders UK would deliver him a 7 per cent share of the UK book market.

Industry analysts believed Branson, owner of the 127-store Virgin Megastores chain, would have a good chance of taking control of Borders UK. Retail Knowledge Bank senior partner Robert Clark said Virgin was one of the few possible trade buyers not ruled out by competition concerns.

He said: 'The big stores would qualify as Virgin Megastores and the small Books etcs would give Virgin [more of] a high street presence.'

But some observers raised their eyebrows at the prospect of a deal because Virgin Retail is loss-making. According to results filed at Companies House last week, the retailer made a pre-tax loss of£85 million for the year to April 1, 2006.

However, Clark said that a tie-up could bring benefits of scale. Borders International sales - of which the UK accounts for about 70 per cent - rose 12 per cent to US$650 million (£330 million) for the year to February 3.

Branson may face competition for the 70-strong chain. Borders UK chief executive David Roche is thought to be keen to stage a management buy-out. Bookselling entrepreneurs James Heneage, founder of Ottakar's, and Tim Waterstone, who established the eponymous books chain, may also be interested. WHSmith could be keen to snap up some airport stores.

Borders intends to focus on its core US division after exiting its international operations.

UK bookselling has been characterised in recent years by ferocious discounting, increasing supermarket power and the growth of e-tail.

No comment was available from Virgin Retail or Borders.

Discount bookseller The Works has completed its acquisition of Bookworld - the retail arm of David Flatman - which went into administration in January. The deal delivers The Works 26 more stores and increases its portfolio to more than 300 shops.