Canadian Doubles: Indigo to Keep Stores It Was to Divest
By Leah Eichler, PW Daily for Booksellers -- Publishers Weekly, 1/9/2002
The independent trustee appointed to sell 23 Indigo bookstores last fall was unable to find a buyer by the January 8 deadline. As a result, the stores remain the property of Canada's dominant bookstore chain."We would have preferred to see these stores sell, obviously" Robert G. Lancop, assistant deputy commissioner of Competition, Mergers Branch, told PW Daily. "But there are many other provisions in place to protect and promote competition to make for a much healthier, more stable industry."
As part of Indigo and Chapters merger deal, Indigo was ordered to sell 13 superstores and 10 mall stores and was given three months to find a buyer that would keep the stores in business. The Bureau hoped a single party would buy several locations in order to create another chain.
After Indigo proved unsuccessful in finding a buyer, the stores were handed over to an independent trustee, Richter & Partners Inc. While Richter said several parties expressed an interest in certain store locations, no formal offers were received. But that was not for want of trying. Richter canvassed domestic and international markets, contacting some 288 parties.
"General market conditions, and restrictions on foreign ownership of retail bookstores in Canada made it difficult to secure a buyer for the stores," said Peter Farkas, senior vice-president, Richter & Partners. "Tighter capital markets, brought on by the recent economic downturn acted as a further barrier to entry."
Although the Competition Bureau was optimistic that the stores could be sold, most people in Canadian publishing circles were skeptical. Todd Anderson, president of the Canadian Booksellers Association, remarked, "There's no real surprise that they couldn't sell the stores."
Although the stores will be returned to Indigo, the Competition Bureau maintains that the code of conduct, which deals with issues such as discounts and returns, and the consent order, which restricts the chain's expansion, will work to balance the industry.
"In the overall scheme of things, we believe the solution we brought promotes competition and will put a limit on their [Indigo] growth. It is in a consent order and the feedback we have had from both the publishers and the booksellers is very positive. Booksellers see opportunities for growth and the publishers believe that the code of conduct should be effective in assisting them in bringing things into a ore normal state again so that down the road we have a healthier industry," said Lancop.
Anderson agreed with the Competition Bureau's assertion that the industry has benefited from the restrictions on the chain. "Now, the Competition Bureau really has to enforce the code of conduct and make sure they [Indigo] adhere to it," Anderson said.
An Indigo spokesperson could not be reached for comment, and it was unclear at press time what Indigo will to with the returned outlets. The company has suggested in the past that it plans to close underperforming stores, and the 23 outlets would be a likely starting point.
Should Indigo decide to close any stores, it is required under the consent order to provide publishers with 60 days' notice. It must also make its best effort to place the books from the closed stores into other stores.
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