Pacific Equity bids for Borders Australia-source

By Victoria Thieberger

MELBOURNE, Sept 21 (Reuters) - Private equity firm Pacific Equity Partners (PEP) has lodged an indicative offer for the Australian and New Zealand businesses of bookseller Borders Group Inc (BGP.N: Quote, Profile, Research, Stock Buzz), a source said, in a deal expected to be worth more than A$100 million ($87 million).

The source familiar with the situation told Reuters that PEP lodged its offer through its A&R Whitcoulls unit, which runs the local, 180-store Angus & Roberston book chain. It has started due diligence, which is expected to take four to five weeks, the source said. PEP is one of several likely bidders for the 24 Borders' bookstores, though no decision on a sale is expected until November. The sale is being handled by sale advisors KPMG.

Other potential suitors include privately owned Australian booksellers Berkelouw Books and Dymocks, according to online reports by trade journal Inside Retailing, which also said Borders was likely to fetch more than A$100 million.

"We have had a very strong response from potential purchasers," said KPMG corporate finance executive director Luke Lawrentschuck, including from trade and private-equity firms.

He said final offers are due in mid to late October. He declined to name any potential bidders.

PEP acquired the A&R Whitcoulls chain in 2003 from British retailer WH Smith (SMWH.L: Quote, Profile, Research, Stock Buzz).

Private equity firms often hold assets for three to five years while turning around a business before floating or selling it, and there has been speculation PEP could float A&R Whitcoulls and Borders on the stock exchange, if successful in a bid.

Borders, the second-largest U.S. bookstore chain, plans to sell off most of its overseas stores to focus on its loss-making U.S. operations.

Last month, Borders reported its second-quarter loss widened to $25.1 million from $18.4 million a year earlier. ($1=$A1.16)