Chapters Inc. – Indigo Books & Music Inc. merger
Uploaded by frollypoo on Mar 02, 2002
Issue Analysis: Chapters Inc. – Indigo Books & Music Inc. merger
The idea of a superstore book retailer was that of Larry Stevenson, the former CEO of Chapters Inc. This legacy of creating the ultimate booklovers haven began when Stevenson acquired Coles and Smithbooks. These smaller retailers helped to formulate the idea of Chapters, which was launched in 1996. Later that year Heather Reisman the co-owner of Trilogy Retail Enterprises established her own branch of superstore book retailing called Borders Canada, this created a bitter rivalry. This rivalry stems back to the day when Reisman launched Borders Canada, which was an American and Canadian book retailing venture. Stevenson, sensing competition lobbied the idea, and Industry Canada disallowed the creation of this company. Reisman evidently did not give up, and later that year founded Indigo Inc., she hired away seven on the top executives from Chapters Inc., which infuriated Stevenson. Over the years, the inability to control inventory and the failure of Chapters Inc.’s e-commerce endeavor caused an $84.5 million annual loss by Chapters Inc., Indigo Inc.’s losses were also great totaling $31.7 million. Many saw the merger of the two industry conglomerates as the only means of salvaging their operations.
When Indigo Inc., on November 28, 2000 made its bid to obtain Chapters Inc; many industry analysts had different ideas about the merger. Tom McFeat of CBC News Online recognized the need for healthy competition in the market place. Mcfeat compared Chapters and Indigo Inc.’s number of stores and found that there would be no competition in the Canadian Book Industry if the two chose not to merge. He identified that with the merger of Chapters Inc. and Indigo Inc. stores would have to be closed resulting in Job losses for those who are employed by the respective companies. This does not include the lost revenue and jobs for independent bookstore owners who cannot compete with such a large conglomerate. In consequence of the merger, Chapters Inc., known for discounting bestsellers up to 50% off the suggested selling price, was forced to limit price-cutting to a maximum of 30%. McFeat also revealed the concern of The Writers Union of Canada, which was “that if the merger went ahead, it would be even more difficult for an author to get published unless the book was likely to be a best seller”. Paul Brent of The Financial Post views the merger as being...