Ann Arbor, Mich. Borders Group said on Friday that a company controlled by financier Bennett LeBow has taken a $25 million equity stake in the chain.
LeBow, who will join Borders' board, bought 11.1 million shares for $2.25 each, the chain said. That makes him the largest shareholder in the chain, with a larger stake in Borders than investor Bill Ackman's Pershing Square Capital Management, which owns 10.6 million shares. Before this transaction, Pershing, which owns 17.7% of the company, was the largest shareholder.
LeBow is the chairman of tobacco holding company Vector Group Ltd. Vector chief executive Howard Lorber is also joining Borders' board.
"Ben's investment will improve the company's capital position, and provide greater stability as we execute strategies to transform the brand," said Borders Group interim president and CEO Mike Edwards.
Borders said it would use LeBow's investment to improve its capital position and bolster its push into the fast-growing electronic books market.
The investment comes a few weeks after Borders repaid a $42.5 million loan to Pershing Square and secured access to more credit.
Last week, Ackman told Reuters that Borders was still not "out of the woods" and questioned whether there was room for two national specialty bookstore chains in the United States. Borders said that Pershing Square had indicated support for the investment from LeBow.
To make room for LeBow, Richard McGuire, a former partner at Pershing, is resigning from the board.
Borders said it needed the approval of its shareholders to issue LeBow warrants to acquire an additional 35.1 million shares at $2.25 apiece.