Borders Group, the US-based bookseller, has hired Merrill Lynch to explore the sale of its struggling UK operations, including the Books etc chain.

City sources said the UK operation, which employs some 2,000 people in 42 large superstores and 30 smaller shops in the UK, could be worth about £50 million. The company does not own any real estate in the UK.

George Jones, the Borders chief executive, told Times Online that the company had decided to retreat from the competitive UK market "because we need to fix our domestic superstores, and that's going to require focus and money".

Borders will now focus on its US business, which accounts for about 85 per cent of its sales, and on building up its online store. It recently revamped its executive team in the UK, appointing David Roche, a former Waterstone's executive, to lead its British business.

Mr Jones, who recently toured Borders' UK operation, said he believed the UK business was capable of taking share from market rivals such as HMV's Waterstone's chain. "We are leaving business on the table there," he said.

He added that he believed that Borders UK needed to expand, but said the parent company was not placed to inject fresh capital into the business.

The news came as Borders Group, the second-largest US bookseller after Barnes & Noble, swung into a quarterly loss. The group has been hit by fierce competition and by charges linked to store closures at Waldenbooks, the largest mall-based books chain in the US. Sales at the UK business were flat.

Barnes & Noble also released results today, posting a slight increase in fourth-quarter profits that missed Wall Street expectations. It also forecast a loss for the first quarter.

The decision to explore a sale of its UK operation, a decade after its acquisition of Books etc brought Borders to Britain, comes as part of a wider strategic review covering the majority of Borders' international operations, including the group's superstores in the UK, Ireland, Australia and New Zealand.

A spokesman for the group said that a sale was being considered alongside a possible franchise deal, under which the UK stores would keep the Borders branding.

Borders, like rival Waterstone's, has suffered amid fierce competition from supermarkets and internet retailers. Analysts today said that it was hard to see where buying interest for Borders’ UK business could come from.

HMV bought Ottakar's for £62.8 million in May, having slashed its original £96 million offer for the bookseller after an inquiry into competition issues delayed the deal. After issuing the latest in a string of profits warnings earlier this month, analysts said HMV, which recently announced plans to close 30 Waterstone's stores, was unlikely to show serious interest in Borders UK or Books etc.

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