Chapters' Plans for Chapters Online Murky
Leah Eichler -- Publishers Weekly, 3/5/2001
The future of Chapters Online remains uncertain after Chapters Inc., recently acquired by Trilogy Retail, announced that it would withdraw its bid for the remainder of Chapters Online's shares.
Chapters' previous management had set in motion a buyback plan for Chapters Online, offering C$3.40 (U.S.$2.20) per share to acquire the remainder of the online retailer. Trilogy—owned by Heather Reisman and her husband, Gerald Schwartz—had criticized the deal during their hostile takeover of Chapters. Chapters' new management, led by new CEO Reisman, had tried to change the deal, offering stock instead of cash, but then they switched back to an all-cash deal that expired February 23.
Reisman stated that she intends to grow the online division, but would not comment on whether or not they would repatriate it. "We are going to grow [Chapters Online]. On a financial basis, we are working on our approach, so I have no comment on that at this point. We are looking at our best strategy right now," Reisman told PW.
Reisman explained in a statement that they decided to withdraw their bid for Chapters Online due to their inability to gain the mandatory approval from lenders. "Upon taking control of Chapters Inc., we were surprised to learn that the requisite creditor consents had not yet been obtained, especially given that almost two months had passed since the announcement of the bid," said Reisman. "We continued the efforts to obtain those consents, but they have not been obtained. We are not permitted to complete the offer without our lenders' consents," she added.
The independent committee of Chapters Online's board of directors disagreed, saying that the moment Trilogy acquired more than 50% of Chapters Inc., the condition requiring these consents was waived. Tom Stephenson, chairman of the committee, said that Chapters is aware of the committee's position and disagrees with it. "This is a matter that needs to be determined by appropriate regulators or the courts, and we will pursue these avenues," Stephenson said.
In another development at Chapters Online, the unit will cut 58 staff positions, eliminating about C$1.6 million ($1 million) in operating costs. The changes will allow the company to focus its resources on product availability, delivery and improving customer service.
