Publishers Call B&T AMS Bid Low

Wholesaler offered $76 million

by Staff -- Publishers Weekly, 2/19/2007

At last Friday afternoon's hearing to approve procedures for its bid to buy certain AMS assets, Baker & Taylor adjusted its original $76 million offer after objections from publishers that the bid was too low. In papers filed Thursday, the unsecured creditors' committee objected to certain proposed bidding procedures and stalking-horse protections included in B&T's letter of intent to buy AMS assets. The committee contends that the proposed procedures, including the timetable, are "akin to a fire sale liquidation," and would benefit only AMS's primarily lender, Wells Fargo Foothill, and B&T. The motion also objects to the idea that since B&T is buying only certain AMS assets, AMS could sell other assets to different buyers without consulting the committee. In addition, the breakup fees included in the LOI are too high and could prevent a counteroffer from being made, the committee argues.

There are few deals on which to base a transaction in the book wholesaling business; one recent transaction was B&T's own purchase by Castle Harlan. The private equity firm last year paid $455 million to acquire B&T, which has estimated sales of $1.45 billion. Using that revenue multiplier, the AMS wholesaling business theoretically is worth about $200 million. Of course, since AMS is in deep financial trouble, receiving top dollar is not realistic. But the low offer has many publishers favoring liquidation and has renewed talk about why AMS executives turned down earlier offers for the company. AMS has acknowledged that it had been soliciting offers for at least six months before its bankruptcy filing, although it had been unable to close a deal. Prior to its February 12 bid, B&T had made offers for AMS on January 23 and 24, according to court documents. It is unclear why those bids were not acted on. The problem with soliciting a higher bid is that two of the logical candidates to make a better offer, Ingram and Levy, appear content to pick up pieces of AMS's business without buying the entire company.

With the growing possibility that B&T may acquire the AMS assets, publishers are preparing to monitor what will happen to returns. Publishers say they will not give full credit for books that were shipped to AMS but are being returned by a different company.