Chapters to Buy Back Online Operations

In a serious attempt to beef up its online presence and improve customer service, Chapters Inc. will take control of Chapters Online by offering to purchase all outstanding shares in Chapters Online not currently owned by the giant retailer.

"This is the right transaction for the right time," said Chapters CEO Heather Reisman. "Bringing Chapters Online fully under the Chapters umbrella creates the opportunity to improve customer service and lower costs." Chapters, which currently owns 69% of its online operation, will offer Chapters Online shareholders one Chapters share for every 7.14 common shares they hold. Chapters Online shareholders are expected to vote on the transaction, subject to creditor and regulatory approval, in October.

Speculation about the future of Chapters Online surfaced after Trilogy Retail acquired Chapters in February, merging it with Indigo. After the merger, Chapters withdrew its bid to buy the remainder of Chapters Online. Reisman explained at the time that Chapters' decision to withdraw its bid for Chapters Online was attributed to its inability to gain the mandatory approval from lenders. After the takeover, Chapters' current management offered Chapters Online shareholders the equivalent of C$3.50 in shares rather than cash, but the offer was rescinded after shareholders complained.

Peter Cooper, president of Chapters Online, who joined the company in February, expressed in a statement his eagerness to improve the online site. "Our board and the new executive team of both Chapters and Chapters Online have worked hard over the past several months to set the foundation for a strong, innovative and profitable online business," he said.

Meanwhile, Chapters Online sent a letter to customers advising them that its new Web site, chapters.indigo.ca, will be unveiled soon, with a "crisp, clean design and dramatically improved search and browse functions."