5 Troubled Retailers the Buyout Sharks are Circling

When sales are down at publicly held retail chains, their stock values sink, and they become takeover bait. Here's a look at why the buyout rumor-mill is working overtime about five major retailers:

• Rite Aid (RAD). A debt-burdened also-ran in the pharmacy sweepstakes for many years now, Rite Aid acquisition rumors spiked after Walgreen (WAG) bought privately held chain Duane Reade in February. Walgreen or rival CVS Caremark (CVS) could bid for Rite Aid, craving its nearly 12 percent market share but antitrust concerns might cause it to need to be broken up and bought in pieces. The company is hemorrhaging money -- $9 $6 billion in debt, and it's lost more than $3 billion in the past two years -- so a turnaround firm would have to be willing to invest big here. Many of its 4,700-plus stores would likely close.
• RadioShack (RSH). The iconic electronics chain has been cleaning up its act recently, earning CEO Julian Day a nearly 50 percent pay boost this year. The rumor: the 4,500-unit chain has been cleaned up for sale, possibly to Best Buy (BBY), which has said it wants to grow a chain of at least 1,000 small electronics mini-stores. The Shack might provide an instant way for Best Buy to get into that game.
• GameStop (GME). Here's another chain Best Buy is reportedly taking a look at acquiring. Though many fear the videogame seller will eventually go the way of troubled Blockbuster (BBI) as digital delivery methods increase for games, for now its network of over 4,500 stores, credibility with its tween-to-young-adult audience, and 50 percent market share may attract a buyer. Another attractive feature: unlike many big specialty retail chains, GameStop is still making money, but comparable-store sales are down and so is the stock price.
• Williams Sonoma (WSM). The luxe housewares chain saw its stock price spike earlier this month after rumors swirled that an acquisition was in the offing. One research house has worked up a report on how a W-S merger would work with footwear and accessory retailer and wholesaler Genesco (GCO), which operates Journeys, Dockers, and Underground Station stores. Sales at comparable stores are in a swoon at the 600-store chain, leaving it vulnerable to a takeover bid.
• Borders Group (BGP). The lagging book megastore chain is frequently talked about as a buy target for archrival Barnes & Noble (BKS), but both chains are struggling now. Another possible suitor under discussion is Canadian bookseller Indigo, which could use the chain to leap into the U.S. market.