A for-sale sign has been hoisted over the stationery chain two months after Borders initiated a strategic review.
Rival retailers HMV and WHSmith, along with a number of venture capital businesses, have been suggested as potential buyers of the chain, which achieved a 99 per cent increase in pre-tax profits to£6.3 million in the year to February 3, 2007.
The sale, for an undisclosed amount, will be watched with interest by Luke Johnson, owner of Borders UK, in which Paperchase operates the majority of its 100 stores as concessions.
In March, Borders – which disposed of Borders UK to Johnson in September last year – launched a strategic review which could consider the sale of the entire company or individual divisions.
At the same time, Michigan-based Borders, which acquired a 97 per cent stake in Paperchase in 2004, secured a US$42.5 million (£21.9 million) loan from its biggest shareholder, Pershing Square Capital Management.
A source said HMV, which owns rival book chain Waterstone’s, may be interested in looking at Paperchase’s books after the roll-out of an enhanced gift stationery offer to 100 stores in its last financial year.
He added: “Paperchase is the sort of thing that private equity would like to pick up at a low point and, in three years’ time, the speciality retail sector will have clawed back sales.”
Paperchase chief executive Timothy Melgund, who conducted a management buy-out of the retailer in 1996, said: “It is widely known that Borders are conducting a strategic review.”
Paperchase also trades from standalone stores and concessions in House of Fraser and Selfridges department stores in the UK, as well as within Borders stores in the US, where it has an opening programme.
It is also understood that Indian retail giant Tata is in the process of acquiring the Australian arm of Borders.
Borders, Borders UK, WHSmith and HMV declined to comment. Tata Retail were unavailable for comment.