Borders Group Inc. said Friday that financier Bennett LeBow is investing $25 million in the company and will become chairman.
The nation's No. 2 traditional book seller said LeBow, chairman of holding company Vector Group Ltd., is buying 11.1 million shares at $2.25 apiece, which will be used to help strengthen its balance sheet and grow its online efforts.
Borders, which is based in Ann Arbor, Mich., has been trying to expand its eBook store to boost sales and keep pace with competitors such as Amazon.com Inc. and discount retailers. It has cut jobs, closed stores and reduced spending to improve profitability.
LeBow's investment stipulates that Borders' board be made up of nine members. Along with LeBow joining the board as chairman, Vector President and CEO Howard Lorber will become a director and current Borders board member Richard McGuire has resigned.
"(LeBow's) investment will improve the company's capital position, and provide greater stability as we execute strategies to transform the brand," Borders interim President and CEO Mike Edwards said in a statement. "As an astute investor and business operator with a strong technology background and proven experience with driving company turnarounds, he will play an extremely important role in helping us redefine the Borders brand that is so critical to unlocking a turnaround."
LeBow is best known for his investments in the tobacco industry. Vector Group subsidiaries Liggett Group LLC and Vector Tobacco Inc. make cigarettes and other related products. Vector Group also owns New Valley LLC, which has a 50 percent ownership stake in Douglas Elliman Realty LLC and holds investments in California and New York real estate projects.
Billionaire activist investor William Ackman's Pershing Square Capital Management LP, a major Borders shareholder, has expressed its support of the transaction, Borders said.
Last month the company said it had paid back a $42.5 million loan Pershing Square and received new financing, including a $700 million credit facility that matures in March 2014 and a $90 million term loan credit facility.
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