UPDATE 1-Borders to sell UK, Irish units to Risk Capital

(Adds share move, details, background)

NEW YORK, Sept 21 (Reuters) - Borders Group Inc (BGP.N) said on Friday it plans to sell most of its British and Irish subsidiaries to London-based private equity firm Risk Capital Partners for 10 million pounds sterling up front, or about $20 million, in an effort to focus on its U.S. business.

Borders is eligible for an additional payment of up to 10 million pounds contingent on the future performance of the business.

Borders, the No. 2 U.S. bookstore chain behind Barnes & Noble Inc (BKS.N), has been struggling against lower-priced competitors including Wal-Mart Stores Inc (WMT.N) and Internet sites.

It said in March it would consider selling most of its overseas stores, close nearly half of its Waldenbooks stores in the U.S. and start selling books through its own Web site.

Risk Capital has set up a new company called Bookshop Acquisitions Ltd to acquire the British and Irish businesses. Borders will receive an equity interest of about 17 percent in the new company.

The transaction includes 41 Borders superstores and 28 Books etc. stores in the U.K. and the Borders superstore in Ireland.

Another private equity firm, Pacific Equity Partners, has bid for Borders' Australian and New Zealand stores in a deal expected to be worth more than A$100 million ($87 million), a source familiar with the situation told Reuters earlier this week.

Borders shares were down 41 cents, or 2.9 percent, at $13.90 on the New York Stock Exchange.