Outsiders Eager to Purchase Chapters' Assets

Just when many industry insiders were convinced no one would be interested in acquiring Chapters' and Indigo's assets, a group of potential buyers emerged. Two industry outsiders, representing an unknown number of buyers, have entered the fray, stating they would consider purchasing the assets Chapters and Indigo must divest in order to merge. According to the consent order filed with the Competition Tribunal, Chapters and Indigo must sell 13 superstores, 10 mall stores, some online properties, up to three trade names and a distribution facility (News, Apr. 30).

However, both Anil Amlani, a chartered accountant, and Bruce Barr, a marketing expert, think that the Competition Bureau is not forcing Chapters and Indigo to sell enough assets and have filed an intervention request in an effort to acquire at least 24 superstores. Asked why they would be interested in entering the book market, Barr explained that his observations of the U.S. retail market show that there is a lot of potential for a second chain in Canada.

"We've given some thought to what we think it might take to build a differentiated competitor in Canada and we think there is an opportunity. When you look at the U.S. experience and some of the per-store performances in Canada, it tells us that with solid infrastructure and a sound positioning, we could probably be successful," Barr told PW.

Barr and Amlani believe they would need more than 13 superstores in order to compete with the Chapters-Indigo chain. Legal counsel on behalf of Amlani and Barr stated that in order to achieve economies of scale, they would need 24 stores and a strong, multistore, regional presence. Currently, the locations of the stores for sale do not occupy any single geographic area, which acts, according to Barr, as a barrier to competition. The only two markets where Chapters-Indigo must sell more than one location are Vancouver, where two superstores are up for sale, and Toronto, where six are to be sold.