ANN ARBOR, Mich., Sept. 21 /PRNewswire-FirstCall/ -- Borders Group, Inc. today announced that following a competitive auction process, the company has reached an agreement to sell its U.K. and Ireland subsidiaries to Risk Capital Partners, a London-based private equity investor. Risk Capital Partners has set up a new, wholly-owned subsidiary company (Bookshop Acquisitions Ltd.) for the purpose of acquiring Borders U.K. and Ireland. The purchase price consists of a 10 million pounds Sterling (approximately $20 million) up-front cash payment plus an additional payment of up to 10 million pounds of deferred cash consideration, which is contingent on the future performance of the business. In addition, Borders Group will receive an equity interest of approximately 17 percent in Bookshop Acquisitions Ltd.
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The transaction includes all 41 Borders superstores located in the U.K. and the Borders superstore in Ireland, as well as all 28 Books etc. stores in the U.K. Risk Capital Partners also retains the right to use the Borders and Books etc. brand names consistent with a brand licensing agreement as part of the acquisition.
The Borders U.K. and Ireland management team will continue to be led by David Roche, who will serve as chief executive officer of the new company.
"The sale of our U.K. and Ireland subsidiaries is a major step forward in our previously announced strategic plan to drive a turnaround of Borders Group," said Chief Executive Officer George Jones. "This sale allows us to focus investment and resources on our core business, which is the U.S. superstore segment, and gives the U.K. and Ireland business the opportunity to succeed with the focus and investment Risk Capital Partners will bring. In addition, the equity interest Borders Group received allows our company to participate in the potential future upside of the U.K. business."
Luke Johnson, chairman of Risk Capital Partners said, "We are excited by the opportunity presented by Borders U.K. and Ireland and pleased that Borders Group will have an equity position in the new company. We intend to build on the strength of the business and this well-respected brand as one of the U.K.'s largest book retailers. Our strategy will focus on improving sales and optimizing the store base while improving margins and inventory management."
Not included in the sale is Borders Asia Pacific, which includes 20 Borders superstores in Australia and four superstores in New Zealand that are in the midst of a previously announced strategic alternatives review by Borders Group, and that process continues. Also not included in the sale is the company's successful Paperchase operation, which includes shops within existing Borders stores in the U.K. and Ireland, and in Borders superstores in the U.S., as well as its freestanding stores in the U.K. Paperchase will continue to operate as it has with Borders Group retaining worldwide ownership. Furthermore, the company's franchise operations in Dubai and Malaysia and its superstore in Singapore are not included in the transaction.
Borders Group will incur a non-cash, after-tax loss for the sale of the U.K. and Ireland subsidiaries of approximately $115 million with minimal tax benefit. The loss will be recorded in the third quarter.
About Borders Group
Headquartered in Ann Arbor, Mich., Borders Group, Inc. is a leading global retailer of books, music and movies with more than 1,200 stores and over 32,000 employees worldwide. More information on the company is available at http://www.bordersgroupinc.com/.
About Risk Capital Partners
Risk Capital Partners is a private equity investor with particular expertise in the retail sector. Significant investments include women's fashion retailer East, restaurant chain Giraffe, and GRA - the Greyhound Racing Association. In the past 18 months Risk Capital has successfully sold Integrated Dental Holdings, Mayfair Bingo, Signature Restaurants and its stake in Loewy Group for attractive returns. It has also made new investments in Patisserie Valerie, Public Recruitment Group and APT Controls. More information on the company is available at http://www.riskcapitalpartners.co.uk/.
Safe Harbor Statement
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. One can identify these forward-looking statements by the use of words such as "projects," "expected," "estimated," "look toward," "going forward," "continuing," "future," "planning," "returning," "guidance," "goal," "will," "may," "intend," "anticipates," and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address matters such as the company's future financial performance (including earnings per share growth, EBIT margins and inventory turns, same-store sales growth, and anticipated capital expenditures and depreciation and amortization amounts), its strategic plans and expected financing and benefits relating to such plans (including steps to be taken to improve the performance of domestic superstores, the exploration of strategic alternatives with respect to certain international operations, the downsizing of the Specialty Retail Segment and the development of a proprietary Web site), its intentions with respect to dividend payments and share repurchases, and possible future benefits relating to its equity position in Bookshop Acquisitions Ltd.
These statements are subject to risks and uncertainties that could cause actual results and plans to differ materially from those included in the company's forward-looking statements. These risks and uncertainties include, but are not limited to, consumer demand for the company's products, particularly during the holiday season, which is believed to be related to general economic and geopolitical conditions, competition and other factors; the availability of adequate capital to fund the company's operations and to carry out its strategic plans; the performance of the company's information technology systems and the development of improvements to the systems necessary to implement the company's strategic plan, and, with respect to the exploration of strategic alternatives for certain international operations, the ability to attract interested third parties.
The company's periodic reports filed from time to time with the Securities and Exchange Commission contain more detailed discussions of these and other risk factors that could cause actual results and plans to differ materially from those included in the forward-looking statements, and those discussions are incorporated herein by reference. The company does not undertake any obligation to update forward-looking statements.
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