TROY, Mich. -- Kmart Corp. announced Friday an agreement had been reached to acquire Borders Inc., a chain of 21 book superstores, in a stock-for-stock exchange.
Kmart officials said the company would issue convertible preferred stock in exchange for all outstanding Borders stock.
The acquisition of the Ann Arbor-based firm was still subject to required government approvals, officials said.
Kmart already owns Waldenbooks, which is headquartered in Stamford, Conn., and operates more than 1,200 bookstores nationwide.
'The acquisition of Borders provides Kmart with an excellent growth opportunity in the book superstore business which is expected to become one of the major channels of book distribution in the years ahead,' said Kmart Chairman Joseph E. Antonini. He said the acquisition 'strengthens Kmart's portfolio of high-volume, excellent growth opportunities for Kmart and will enhance shareholder value as the operating profits of this group grow.'
Borders President Robert F. DiRomualdo said Kmart's financial resources 'will enable us to step up our pace of expansion, enhancing the long-term outlook for Borders and its employees.
'We are excited about our affiliation with Kmart and Waldenbooks and are confident that the relationship will enable us to become dominant players in the book industry,' he said.
Waldenbooks had sales of $1.06 billion last year. Border's sales more than tripled over the past three years, reaching $101.2 million for the year ended March 29.
Retail analyst Walter Loeb said the deal would allow Kmart to revitalize Waldenbooks and Borders to raise cash to grow. He called the merger a 'phenomenal combination.'
