Ackman’s Pershing Square will back Borders' bid for Barnes & Noble

New York City -- Activist investor Bill Ackman’s Pershing Square Capital Management raised its stake in Borders Group from 31.5% to 37.3% and is prepared to finance an offer by Borders to buy larger rival Barnes & Noble, according to a filing with the Securities and Exchange Commission Monday.

According to the statement, Ackman is prepared to finance an offer by Borders to buy all of Barnes & Noble’s stock in an all-cash transaction valued at $16 per share, which would amount to about $960 million, based on the shares outstanding.

The proposal from Pershing, the largest Borders holder after CEO Bennett Lebow, would combine the two biggest bookstore chains in the United States.

“Mr. Ackman has expressed his willingness to provide financing for such a transaction, and we welcome his participation,” Mary Davis, a spokeswoman for Borders, said in an e-mailed statement, as reported by Bloomberg. “We have previously expressed to Barnes & Noble our interest in such a business combination, and we look forward to continuing those discussions.”

Ackman previously wanted to combine the booksellers, according to court documents and testimony from Barnes & Noble’s lawsuit over a so-called poison pill provision with Ron Burkle’s Yucaipa Cos. Notes taken by a Barnes & Noble lawyer during a board meeting recorded founder Leonard Riggio saying that Burkle was working with Ackman, then the largest shareholder in Borders, in pursuing a deal.

Burkle also said during testimony that he told Riggio that he had met with Ackman and they discussed Barnes & Noble buying some Borders assets if the company went bankrupt.