February 22- March 1, 2007 Edition

AMS Sale Due Court’s

OK on March 5

PGW Woes Remain

DELAWARE/2/22/07–The U.S. Bankruptcy Court has set February 28 at 5 p.m. as the date for any objections to the sale of Advanced Marketing Systems, Inc. to Baker & Taylor, Inc., but little or no objection is expected to be filed at this point. Terms of the $76.25 million sale will be evaluated by creditors and debtors on March 1, and the final Court approval is expected in a Sale Motion at 10 a.m. March 5. B&T expects to close the deal before March 15.

PGW, the bankrupt company’s distribution arm, was awarded to Perseus Books Group by the Court February 16. Several issues surrounding the takeover have surfaced. The fate of publishers who did not sign an agreement to assign their business to Perseus is now uncertain. Amber-Allen, which filed a formal objection against the court’s assignment of assets to Perseus, will now be rejected as a Perseus customer, but Perseus must return all inventories to Amber-Allen within 15 days after the deal is closed. Amber-Allen, however, will be stuck for freight charges.

Some are concerned about the potential that Baker & Taylor, or Perseus via PGW, could dump huge numbers of returned books back onto the small publishers, who would also have to bear the cost of return shipments. Carolyn Sakowski, an author whose book was published by travel publisher John F. Blair, recently reported to the website Shelf Awareness that shortly after Baker & Taylor acquired Koen Book Distributors in July 2005 together with all of its warehoused stock, the small publisher received huge numbers of returns from B&T, most in their original shipping containers from Koen. When alerted to the problem, Baker & Taylor agreed to take back the Koen returns, Sakowski wondered, however, if B&T had simply repacked them and returned them to Blair under their own label.

Reports of grossly inflated returns that far outnumber sales to B&T were widely reported in 2005. One small house said that B&T had bought fewer than 10 copies of one title and wanted to return "more than 200." The publisher refused to accept the books saying that he shouldn’t have to take back books he hadn’t sold.

The practice of wholesalers returning more books than they order is a common problem in the industry, especially among small publishers who have little choice but to accept returns from big wholesalers and distributors, whether they exceed sales or not.

Sakowski urged all PGW clients to monitor returns to see that B&T does not exceed the limit of what was originally purchased from the publisher, and to immediately arrange with B&T to have their returns contingent on prior authorization.

“We all know that Blair accepted books [returns] that B&T purchased at a fraction of what they were claiming, but at least this was one way [monitoring and limiting returns] to lessen the pain,” Sakowski was quoted on the web site.

Koen was acquired by Levy Home Entertainment and became Koen-Levy Book Wholesalers based on New Jersey.

Just last week Levy, which lost to B&T in its bid to acquire AMS, announced it is shutting down Koen-Levy for lack of performance. The operation will be closed within 90 days.