June 3, 2010 / 10:12 PM / in 7 years

UPDATE 2-Financier LeBow named Borders Group CEO

* Edwards to head main bookselling business

* Edwards says Borders in “an aggressive turnaround”

* LeBow to function as Borders’ “executive chairman”

(Adds CEO quote, background)

By Phil Wahba

NEW YORK, June 3 (Reuters) - Borders Group Inc BGP.N said on Thursday financier Bennett LeBow, the bookseller’s chairman and largest shareholder, was named chief executive of the company, while interim CEO Mike Edwards will oversee its main bookselling business on a day-to-day basis.

Last month, LeBow invested $25 million and took a 15.5 percent stake in the No. 2 U.S. specialty bookstore chain, overtaking activist investor William Ackman’s Pershing Square Capital Management as the struggling retailer’s largest shareholder. [ID:nN21162548]

Interim Chief Executive Mike Edwards, who was named chief executive of Borders Inc, said LeBow was tapped for his financial expertise and his strong relationships with Wall Street as the company looks to implement its digital strategy in an effort to stem its sales decline.

“We are in an aggressive turnaround,” Edwards told Reuters in an interview. “Ben has a very sound financial background, understands capital markets, is very astute in managing liquidity in turnaround situations and has a very strong network.”

LeBow will act as an executive chairman, run the board and manage relations with the financial community, Edwards said.

Borders has contended with falling sales and market share in recent years as more bookselling has migrated online.

Last week, Borders, which is second to top U.S. bookseller Barnes & Noble Inc (BKS.N), reported sales at its U.S. stores open at least one year had fallen 11.4 percent in its first quarter, but its loss narrowed on cost cuts. [nN27121145]

In March, Borders repaid a loan to Pershing Square and secured access to $700 million in credit, giving it much needed breathing room as sought to implement its digital strategy.

Those efforts include the launch of its own e-book download service this month in an effort to catch up to Barnes & Noble, Amazon.com Inc (AMZN.O) and Apple Inc (AAPL.O), which all sell their own electronic readers and operate popular e-bookstores.

LeBow is also the chairman of tobacco holding company Vector Group Ltd (VGR.N), which includes cigarette maker Liggett Group.

LeBow gained notoriety in 1996 when Liggett Group, under his control, broke ranks with other tobacco companies such as Philip Morris Cos Inc to settle smoking lawsuits brought by state attorneys general.

If LeBow exercises the warrants that Borders plans to issue him, his stake in Borders could reach 35 percent.

Edwards became interim CEO in January when CEO Ron Marshall left the company after only one year to become head of supermarket chain Great Atlantic & Pacific Tea Co GAP.N. (Reporting by Phil Wahba; editing by Steve Orlofsky and Andre Grenon)

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