Luke Johnson, the Channel 4 chairman, has moved into bookshops through the £20 million acquisition of the struggling Borders and Books etc business.

The entrepreneur, who made his name floating Pizza Express in 1993, has bought the business through Risk Capital Partners (RCP), his private equity vehicle, for £10 million with an additional £10 million payable depending on performance.

The 70 stores, which are spread across the UK and Ireland and have 2,000 employees, were put up for sale in March through Merrill Lynch after Borders, America’s second-biggest book retailer, launched a review of its international operations.

The business, which is the UK’s third-biggest high street bookseller, was originally tipped to fetch £50 million, but concerns over the future of book retailing in the face of internet and supermarket competition coupled with the debt market crisis put off many of the mooted bidders.

Mr Johnson admitted last night that, although RCP did not normally attempt to cut offers for businesses it wanted to buy, the credit crunch had “allowed us to refine the terms”.

Other mooted suitors included Sir Richard Branson’s Virgin Group, Tim Waterstone, founder of the rival Waterstone’s chain, and the former Hammicks managing director Trevor Goul-Wheeker.

WH Smith is also known to have been interested, but may have been put off by competition concerns. Last year, HMV’s £96 million bid for Ottakar’s was delayed after the intervention of the Office of Fair Trading. The deal was eventually agreed at a cut-price £62.8 million.

Borders entered Britain a decade ago when it paid an estimated £40 million for London’s Books etc chain. It is thought to have spent a total of about £120 million here, opening 41 Borders-branded superstores, all of which have Starbucks coffee shops and Paperchase stationery concessions.

The US group will retain a 17 per cent share in the UK and Ireland business as well as the Paperchase concession, but will take a $115 million (£57 million) loss in its third-quarter figures. The business delivered underlying earnings last year of about £2 million from turnover of £223 million, although at a pretax level it was marginally loss-making.

Mr Johnson said that the deal would leave the business “virtually debt-free” and with a net tangible worth of £75 million.

He said that up to half a dozen underperforming stores would probably be closed, but he anticipated retaining both the Borders and Books etc brands. In addition to the Borders superstores - a 42nd outlet opens in Cardiff next week – it has 20 high street Books etc shops and eight Borders Express shops, mainly at airports.

Despite competition from the likes of Amazon and Tesco, Mr Johnson said he was confident the business could be turned around under the current chief executive, David Roche.

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