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Paperchase sold in £30m management buyout

Paperchase, the stationery and greetings-card retailer, has completed a £30m management buyout backed by Primary Capital.

The private-equity firm has bought the chain from the bookseller Borders Group in the US, drawing a line under an eventful two years at Paperchase. Primary plans to expand the retailer, which has 65 stand-alone stores and 35 concessions, to as many as 200 sites in the UK. It also wants to grow the concessions business overseas, where it operates only in Ireland and the Netherlands.

Graham Heddle, at Primary, said: "Paperchase's management team has a proven track record... and they have a plan to fundamentally change the size of the business by rolling out in the UK and Europe and hopefully in the US and Far East." Primary has bought a 70 per cent stake and the existing management team led by Timothy Melgund, the chief executive of Paperchase, has taken the remainder of the shares.

Borders Group tried to sell Paperchase in 2008 but the price tag of £50m was seen as prohibitive.

The sale two years ago was also complicated by Paperchase having more than 40 concessions in Borders UK, which was owned by Risk Capital Partners and collapsed last year.

In its latest available accounts, Paperchase suffered a 20 per cent drop in pre-tax profits to £6.5m, on sales up 8 per cent to £61.7m for the year to 31 January 2009.