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Borders Explores Sale

New York City Borders Group on Thursday suspended its quarterly dividend and said it was reviewing strategic options, including the sale of some or all of its businesses.

The company, which also posted a quarterly profit, said its largest shareholder, Pershing Square Capital Management, had offered to purchase some of its businesses in Australia, New Zealand, Singapore and the United Kingdom for $125 million.

Borders has the right, but not the obligation, to require the hedge fund to buy those assets under the backstop purchase offer.

Pershing Square also has agreed to lend Borders $42.5 million and will receive options to buy a 19.99% stake in the company at $7 a share. The stock closed on Wednesday at $7.10.

"This will be a challenging year for retailers due to continued uncertainty in the economic environment," Borders chief executive George Jones said in a statement. "Looking forward to 2008 and beyond, the company determined that additional capital was required to execute our operating plan."

Without the funding, the company may have faced liquidity issues in the next few months, Jones said. It said it was suspending the dividend to preserve capital for operations and strategic initiatives.

Borders said it had appointed JPMorgan Securities and Merrill Lynch & Co. as financial advisors.

The company reported net profit of $64.7 million for the fourth quarter ended Feb. 2, compared with a year-earlier loss of $73.6 million that included large charges for closing Waldenbooks stores.

Revenue fell to $1.35 billion from $1.37 billion, but Borders said sales were up 2.8% after excluding the impact of an extra week in the year-earlier period.

Jones said that although the company was on track to reach its financial targets, worsening economic conditions would slow its progress.

Borders began a turnaround plan last year. It is closing underperforming Waldenbooks stores, weighing options for its international units, and refocusing on its core U.S. store operations.