Borders Group Inc. said late Thursday it agreed to sell itself to private investment firm Najafi Cos. for $215 million and is seeking court approval for the agreement.
Najafi Cos., which owns the Book-of-the-Month Club, will also assume $220 million in debt.
The agreement is tentative and is what is known as a "stalking horse" bid for a company under bankruptcy protection. The bid will open an auction for the company and its assets, so a higher bid is possible.
A bankruptcy court hearing on the deal is set for July 21. Borders, the second largest U.S. traditional book store chain, filed a separate motion to liquidate in case the court does not approve an auction.
Najafi Cos. has been a speculative suitor for the Ann Arbor, Mich.-based company, although Borders has not previously confirmed any specific bidders.
Borders filed for bankruptcy protection in February, hurt by stiff competition from online booksellers and discounters.
A sale provides the "best path forward to reposition the business for a successful future and to maximize value for the Company's stakeholders," Borders said in a statement.
Under terms of the deal, Borders will become part of the business unit of Phoenix, Ariz.-based Najafi Cos. that also owns Book-of-the-Month Club, Doubleday Book Clubs and Columbia House.
Najafi Cos. bills itself as the largest private equity firm in Arizona with more than $1.1 billion in assets. It has investments in restaurant chain Pasta Pomodoro as well as the Phoenix Suns basketball team, for which CEO Jahm Najafi serves as vice chairman.
Borders had said previously in bankruptcy court filings it was in discussions with several potential bidders. It has said it hoped to name a bidder by July 1 and sell itself by the end of July.
Borders, which started with a single store in 1971, helped pioneer the book superstore concept along with larger rival Barnes & Noble Inc. It was brought down by heightened competition by discounters and online booksellers, as well as the growth in popularity of electronic books. It currently operates about 400 stores, down from its peak in 2003 of 1,249 Borders and Waldenbooks.
Borders stressed in a statement that its Borders Rewards program, gift cards and other customer programs all continue to operate normally.
If Borders doesn't successfully sell itself as a complete company, it is asking the bankruptcy court that its assets be sold by a joint venture led by liquidation firms Hilco and Gordon Brothers. Borders is also asking the court to let the two companies liquidate any stores Najafi doesn't acquire in its bid for the company.
Borders expects the sale process will be complete by late July.