Wednesday, December 16, 2009

Borders Back Door China Hook Up

Borders (BGP) announced an interesting ebook strategy. They have partnered with a Canadian book retailer Indigo (TSX:IDG) to launch a service called Kobo. It seems to be all things to all people. In the press release it does not mention that Borders has had a long standing investment in Indigo of approximately 10%. So why was Borders so far behind the game that a minority investment comes up with the better deal.

Also check out Kobo’s other investors and you will find Cheung Kong (Holdings) Ltd. (Stock code: 001) who is the largest shareholder of Hutchison Whampoa Limited holding a 49.97% interest. So if you want to talk about markets these guy’s are connected in China which has enormous potential.

So far the investment is about $16 million which seems small. I’m sure Amazon spends that amount frequently on the Kindle. But it’s the connections that are important. Indigo vended in it’s Short Cover offering but at what valuation.

So how will Borders investors fare in this venture when many other partners have their finger in the pie. Indigo investors may also find that the benefits of this venture do not fully accrue to them. But that China market sure is large.