Barnes & Noble looking into Borders buy

By Lisa Baertlein

LOS ANGELES (Reuters) - Bookseller Barnes & Noble Inc (BKS.N) on Wednesday said it is still looking into a potential acquisition of rival Borders Group Inc (BGP.N) (BGP.N), and shares in Borders jumped as much as 14 percent.

"We are looking at it," Barnes & Noble spokeswoman Mary Ellen Keating said, adding that the company already had said it would explore a purchase after Borders put itself up for sale in March.

While the company confirmed earlier this year that it was interested in Borders, a story in Wednesday's Wall Street Journal said a team of "executives and advisers" has been reviewing the possibility of an acquisition.

Shares in Borders were up 81 cents or 12.8 percent to $7.16, after trading as high as $7.30, while the stock of Barnes & Noble was up 55 cents, or 1.8 percent, to $30.50.

Borders, the second-largest specialty bookseller after Barnes & Noble, has been hurt by rising gasoline and food prices that have left consumers with less money to spend.

The chain has struggled with liquidity issues and has been closing underperforming stores and taking other steps to turn around its business.

"Barnes can be patient and wait for Borders' situation to deteriorate, as signs point to worsening consumer spending which should continue to push out the turnaround," Credit Suisse analyst Gary Balter said in a client note.

"Combining now brings with it many expensive overlapping leases to dispose of, at a time when developers will likely not welcome getting their stores back," he said, adding that a merger in the near future would pose a "major risk of antitrust problems."

A Borders spokeswoman said the company would not comment on its strategic alternatives evaluation.

(Editing by Gerald E. McCormick)