Borders' Top Investor Offers to Finance Barnes & Noble Takeover

Barnes & Noble (NYSE:BKS) may have just edged a bit closer to a takeover by its largest rival Borders (NYSE:BGP).

Bill Ackman, the head of Pershing Square Capital Management and Borders' largest shareholder, has offered to help finance a potential purchase of Barnes and Noble for $16 a share, or about $900 million, according to a filing with the Securities & Exchange Commission.

The bid reflects a 20% premium to Barnes & Noble’s closing price on Friday.

Ackman currently owns about 36.5 million Borders shares, or 37.3% of the company, raised recently from its previous ownership of 31.5%. The hedge fund currently owns a larger stake in the bookstore chain than its own chief executive, Bennett LeBow, who holds 35%.

Ackman held a 12% stake in Barnes & Noble until last year.

The offer is Ackman’s latest move to help turnaround the company. He purchased a large stake in Borders about two years ago but ailing sales have weighed down its earnings and kept its stock inactive.

The deal would combine the nation’s top two book sellers, which have been struggling in recent quarters against online retailers such as Amazon.com (NASDAQ:AMZN). Barnes & Noble posted its third-consecutive quarterly loss last month while Borders has been dealing with dwindling customer traffic.

Barnes & Noble is currently undergoing an auction to sell itself after fighting off investor Ronald W. Burkle’s takeover attempts earlier this year.

Borders surged more than 20% to $1.30 Monday morning on the news, while Barnes & Noble edged up about 19% to about $15.82.