WH SMITH is understood to be eyeing up a swoop for Borders' airport shops as the market awaits a bid from retail entrepreneur Tim Waterstone for the whole group.
City analysts say that although the Office of Fair Trading would block any move for Borders outright from WH Smith, its airport shops are a licence to print money and chief executive Kate Swann will be interested.
WH Smith is trialling stand-alone bookstores and Swann is keen to position the retailer away from its present generalist strategy towards a larger share of the book market.
The chain also owns 10 large out-of-town stores, and analysts say it could be in the market for a handful more.
Nick Bubb, retail analyst at Pali International, said: "WH Smith will definitely be looking at part of it, especially the airport stores and possibly the out-of-town stores. I would be surprised if they are not trawling over it [Borders] this weekend."
Borders Group, the US bookshop chain, has hired Merrill Lynch to explore the sale of its struggling UK operations after its chief executive, George Jones, said the company had decided to focus on "fixing" its US superstores and building up internet business.
City sources estimate that the UK operation, which employs about 2,000 people in 42 large superstores and 30 smaller shops with a turnover of 300m, could be worth about 50m.
Any potential bid by Swann will be watched closely by Tim Waterstone, who is in talks with Mothercare to sell his Early Learning Centre toy chain for an estimated 85m. With a 13% stake, Waterstone will be in line for a substantial payout, which he could then use to fund a potential bid for the UK arm of Borders.
Last night Waterstone refused to comment in detail, but did admit that "something was going on".
Some analysts believe he could be eyeing up a potential swoop for HMV and Waterstone's, the company he founded in 1982. Recently HMV issued its second profits warning in three months, fuelling speculation that up to 30 Waterstone's bookshops will be closed or sold off.
In August, Waterstone told Scotland on Sunday that he didn't believe the two companies were a natural fit and that he "would be very interested in coming back" if "the circumstances presented themselves".
Retail analyst Nick Bubb added: "The longer he waits, the harder it will be for him to disentangle the two companies."
Seymour Pierce analyst Richard Ratner dismissed it as "wishful thinking".
Borders, like HMV in the UK, has found it tough going with an offering of books, music and DVDs. The US arm lost $150m in 2006 and $73m in the last quarter alone. Last week's news came as a major shock to the British management team, which has been re-built under chief executive David Roche.
Analysts also say that private equity was the most likely buyer, and have suggested that Barnes & Noble, the number one chain in the US, might have a look.