With a new $25 million investment, Bennett LeBow, a financier and chairman of Vector Group Ltd., has pushed aside William Ackman’s Pershing Square Capital as the largest shareholder in the Borders Group. LeBow has been named chairman of the retailer and Richard “Mick” McGuire has resigned from the board.
Borders said it will use the new equity funding to improve its capital position and to upgrade both its physical store network and digital sales capability. The new funding comes about six weeks after Borders repaid the $42.5 million loan to Pershing Square and refinanced its other loans. Mike Edwards, interim CEO of Borders, said the investment “will improve the company’s capital position, and provide greater stability as we execute strategies to transform the brand.” Edwards added that “as an astute investor and business operator with a strong technology background and proven experience with driving company turnarounds, [LeBow] will play an extremely important role in helping us redefine the Borders brand that is so critical to unlocking a turnaround for Borders.” In addition to LeBow, Howard Lorber, president and CEO of Vector, is joining the Borders board.
LeBow’s purchase of 11.1 million shares gives him over a 18% stake in the company, topping the 10.6 million shares and 17.7% interest in Borders held by Pershing. How long Pershing will remain a major investor in Borders is unclear, although the firm did receive additional warrants to buy more Borders stock at 65 cents per share. Ackman told Reuters earlier this week he didn’t believe Borders was “out of the woods” yet and questioned whether the market could support two national bookstore chains. Still, Pershing is supporting the LeBow investment.
