Barnes & Noble looks at buying Borders, assembles a study team

Combining the book sellers would require closing stores and resolving antitrust concerns.

NEW YORK (AP) — Barnes Noble Inc. appears to be getting more serious about buying chief rival Borders Group Inc., confirming Thursday that it put together a management team to study the “feasibility” of a combination.

The disclosure came as the nation’s largest bookseller reported a wider loss in the first quarter on a tax-related charge and lowered its sales guidance for the year.

Speculation had been mounting about a possible Barnes Noble-Border combination since Borders announced in March that it was putting itself up for sale and that it had lined up $42.5 million in financing to help it continue operations. At that time, Barnes Noble said it would take a look at its rival.

Borders issued a statement on Thursday saying that the company is “in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date.”

Booksellers are facing fierce competition from discounters like Wal-Mart Stores Inc., which has been aggressive about price-cutting.

Barnes Noble officials declined to elaborate further regarding its review of Borders. But industry analysts say that a potential combination of Borders and Barnes Noble would face numerous obstacles, from the challenge of pairing back a long list of overlapping stores to antitrust concerns from federal regulators.

New York-based Barnes Noble said it lost $2.22 million, or 4 cents per share, in the quarter ended May 3. That compares with a loss of $1.67 million, or 3 cents per share, in the year-ago period.

Excluding the charge, the bookseller would have earned 5 cents per share. The charge was related to an agreement in principle with the State of California to settle its long-standing dispute regarding the collection of sales and use taxes on sales made by Barnes Noble.com from 1999 to 2005. As a result, the company recorded a one-time pre-tax charge of approximately $8.3 million.

The company says revenues edged up to $1.16 billion in the first quarter, from $1.15 billion in the year-ago period.

Analysts surveyed by Thomson Financial expected a profit of 5 cents per share on revenues of $1.17 billion. The estimates typically exclude one-time items.

The company reported that same-store sales, or sales at stores open at least a year, declined 1.5 percent in the period.

Barnes Noble’s shares fell 8 cents to $29.87 Thursday.