Bookstore chain will open two new distribution centers; Ingram hopes for indie support
After Barnes &Noble stunned the industry last November with its announcement that it intended to acquire the Ingram Book Company, the giant retailer again surprised the book community last week when it said that its deal for Ingram was being called off. Although the Federal Trade Commission's investigation of the merger had been dragging on for nearly seven months, there were few indications that the transaction was in jeopardy. Indeed, FTC chairman Robert Pitofsky told the New York Times that the government hadn't won a vertical integration case in at least 20 years. But early last week, word leaked that the FTC staff would recommend that the commission block the deal.
Following the June 1 news reports, events moved swiftly, and on June 2 B&N and Ingram issued separate press releases disclosing their decision to terminate the deal. Although B&N could have fought to have the purchase approved through the courts, both B&N chairman Len Riggio and Ingram Book chairman John Ingram agreed it was time to move on. "It [the investigation] has been going on for so long we were not interested in protracted litigation," a B&N spokesperson said. John Ingram told PW, "There is a limit to how long you can wait for governmental approval in a rapidly changing industry."
In outlining its opposition to the acquisition, the FTC said it was concerned that the merger would slow delivery of books to independents. It also said that a B&N/Ingram combination could stifle the growth of Internet bookselling by dominating the supply chain.
With the decision to scrap the deal, B&N seemed more prepared than Ingram to move on. The bookseller immediately said that it was reviving its plan, announced last September, to open two new distribution centers, one in Memphis, Tenn., and a second in Reno, Nev. Each facility will be about 350,000 square feet, and the company hopes to have the new centers operating within the next 12 months.
John Ingram said his company was looking at a number of different ways to expand the wholesaler, although he provided no specifics. "One thing about a dynamic marketplace is that it provides lots of opportunities," he said, adding that the wholesaler was operating under the presumption that it will continue as an independent company.
Ingram said he was disappointed that the merger seemed to be judged in the political arena, and that the FTC staff had an outdated view of the book market. "The decision was based on the past, while the deal was based on the future," Ingram asserted.
Asked about his earlier comments that without the B&N deal Ingram would need to cut services, John Ingram told PW that the best way to avoid that scenario "is for the independents to buy more books from us. If we're so important to their survival, now is the time to give us their support."
Other wholesalers, who have enjoyed an increase in business since the announcement of the B&N/Ingram deal, said they would continue business as usual. Jim Ulsamer, president of Baker &Taylor Books, said the failure of the merger would not interfere with B&T's expansion plans, which call for the company to nearly double its warehouse capacity (News, May 24). Kathleen Willoughby, v-p of marketing for Bookazine, said the company has seen a flurry of new accounts and added, "I don't expect to lose any of that business".
Independent booksellers -- many of whom were contacted by the FTC during the course of the investigation -- were almost uniformly happy with last week's developments. Many said they will return to doing business with Ingram, provided the company maintains its services. The viability of Ingram concerned Barbara Peters, owner of the Poisoned Pen in Scottsdale, Ariz., who cautioned that this could be a "Pyrrhic victory, given where this leaves Ingram." But most booksellers reflected Michael Sullivan's reaction to the news. "We're exhilarated," said Sullivan, owner of Reprint Book Shop in Washington, D.C. "Ingram has always been a vital piece of the independents' business."
The American Booksellers Association and the Authors Guild, two organizations that led the fight against the merger, were thrilled with the decision to call off the purchase. Paul Aiken, executive director of the guild, said the decision "was good news for writers and readers." Aiken said he believes the FTC ruling turned on the issue of the importance of the diversity of titles in the marketplace. The FTC "recognized that independent bookstores are important outlets for midlist titles," Aiken said. He was also hopeful that the decision could set a precedent for future publishing mergers by setting some boundaries.
In a statement, the ABA said it was "extremely gratified that the FTC recognized that this transaction would have a devastating impact on the marketplace for books." The association noted that the grassroots efforts of booksellers -- which included a letter-writing campaign to the FTC, discussions with members of Congress and a petition drive that collected more than 125,000 customer signatures -- helped convince the FTC to block the deal. "This was the greatest amount of bookseller activism I've ever seen," said ABA chief operating officer Oren Teicher. According to the association's statement, "the ABA and its members are glad to put this issue behind them."
Publisher response to the development was muted, and leading execs, several of whom declined to respond to requests for reaction, were clearly anxious not to express any kind of partisanship.
Simon &Schuster president Jack Romanos commented: "I'm not sure what it meant [for us] when it happened, so I'm not sure I can say what it means now that it's not happening." And Jane Friedman at HarperCollins said, "The only constant in our business is change, and here we go again. It's a still-evolving market environment. We've had a long-standing relationship with both parties, and we'll hope to continue that."
