The transaction includes all 41 Borders superstores in the UK and the Borders superstore in Ireland, as well as all 28 Books etc. stores in the UK 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 represents one of the steps that Borders is taking in its strategic plan to drive a turnaround of the Borders Group, according to CEO George Jones. The Borders CEO comments that the sale will allow the US firm to "focus investment and resources on our core business, which is the US superstore segment." At the same time, Jones points out, the structure of the deal provides for Borders to share in the future potential upside of the UK business under the ownership of Risk Capital Partners.
The sale does not include Borders Asia Pacific, which operates 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, a process that continues. Also not included in the sale are the company's Paperchase operation, its franchise operations in Dubai and Malaysia and its superstore in Singapore.
The Paperchase opration includes shops within existing Borders stores in the UK and Ireland, and in Borders superstores in the US, as well as its freestanding stores in the UK. Paperchase will continue to operate as it has with Borders Group retaining worldwide ownership.
Borders expects to incur a non-cash, after-tax loss for the sale of the UK and Ireland subsidiaries of approximately $115 million, with minimal tax benefit. The loss will be recorded in the third quarter.
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