New Chapter for Kobo as Borders Liquidates

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The impending shutdown of Borders Group Inc. has spelled uncertainty for Canadian digital bookseller Kobo, whose partnership with Borders marked the chain’s too-little, too-late effort to cross over into the digital realm.

Borders was an early investor in Kobo and still holds an 11% stake in the Toronto-based company, which is also backed by majority shareholder Indigo Books & Music Inc., Cheung Kong Holdings and others.

That stake wasn’t included in Borders’ earliest sale proposal, which has now been replaced by a liquidation plan, but Kobo executives still asked for clarity earlier this week in court documents filed with the U.S. Bankruptcy Court in Manhattan. The company cited the “hurried and confusing sale process” when it reminded the court that the right to sell Borders’s ownership stake in Kobo falls under certain restrictions.

Borders’s network of bookstores once marked a major retail distribution channel for Kobo’s eReader device, which came to market far behind’s Kindle, Barnes & Nobles’s Nook and Sony’s Reader, said Morningstar Inc. senior analyst Pete Wahlstrom. Kobo also sells the devices at Wal-Mart, Best Buy and Sears.

Kobo’s eReader has a simpler design and was meant to be offered at a lower price point than the industry’s top-selling models, Wahlstrom said. But the company has a way to go against its better-established competitors.

“You got the sense it was kind of the fourth player in a three-player race,” Wahlstrom told Bankruptcy Beat on Tuesday.

Kobo said it offers more than 2.4 million eBooks, magazines and newspapers.

Kobo told The Wall Street Journal in April that the company had 3.2 million users. A company spokeswoman declined to provide sales figures for the company’s eReader.