Updated from 4:30 p.m. EDT

Shares of

Borders Group

(BGP)

, which operates the second-biggest chain of bookstores in the country, plunged 15% Thursday after the company said it had ended discussions about a potential acquisition of the company.

The Ann Arbor, Mich.-based company -- which in March

hired

Merrill Lynch

to help it explore strategic alternatives that included a possible sale of the company -- said it would continue to explore other options, including stock repurchases.

"We believe Borders is undervalued in the market and we are focused on changing that," said Gregory Josefowicz, president and chief executive of Borders, in a statement. "As we explore our other strategic alternatives, we will continue to concentrate our efforts on running the business, improving efficiencies and growing revenues.''

Shares of Borders have hovered in the teens for the last year. On Thursday, the stock fell 2 3/8, or 15%, to close at 13 3/16 after trading as low as 12 3/4.

Borders already has a share repurchase plan in place. The company plans to spend $62.3 million on repurchasing its own shares this year, according to the annual report the company filed with the

Securities and Exchange Commission

in April. Last year, it repurchased $25.4 million of common stock, and in 1998, it bought back $51.7 million worth of its stock, according to the annual report.

Borders did not elaborate regarding what it intends to do with its share repurchase plan in its statement, and a Borders representative did not return a call.

Prior to Thursday's announcement, the names of several potential suitors had popped up with regard to Borders, including the buyout firms

Bain Capital

,

Apollo Management LP

and

Blackstone Group LP

.

While Borders did not provide a reason for the termination of sales talks, the changes in market conditions over the last several months may have played a role, said David Magee, analyst with

Robinson-Humphrey

in San Francisco. The uptick in interest rates and the volatility in the equity markets probably "made it more expensive to do a buyout," Magee said.

While Magee said he was surprised Borders failed to reach a deal, he noted that over time it may prove beneficial for shareholders "if management shows the numbers they think they can." He rates the stock an outperform. His firm has not done any underwriting for the company.

Borders Group has stores in all 50 states, Britain, Australia and Singapore. Its nearly 1,200 retail stores include about 260 Borders superstores, about 900 mall-based

Waldenbooks

stores and the British-based

Books etc.

chain.