Suitors lining up as HMV considers book chain sale

It might also sell off its Canadian business as it tries to raise funds to secure its future.

But the company, which owns 731 HMV, Waterstone’s and Fopp stores, said no discussions are taking place about an offer for the whole group.

HMV is considering selling the book chain after lenders said it needed to raise £75m in return for a relaxation of its lending covenants.

Potential buyers are rumoured to include the book store chain founder Tim Waterstone and Russian billionaire investor Alexander Mamut.

Retail restructuring specialist Hilco is also reported to be interested in HMV’s Canadian operations.

HMV recently issued its second profits warning of the year as trading conditions failed to improve following its disappointing Christmas season.

The 90-year-old firm, which said earlier this month it would fail a test of its year-end debt rules, said there was no guarantee any deals would be done.

The company, which is closing 60 stores over the next 12 months and shedding jobs, aims to cut costs by another £10m a year.

The group’s shares shot up 20 per cent yesterday following rumours that a number of suitors are interested in making offers for various parts of its business.

Following the early surge, the stock closed up 4.5 per cent last night, a rise of 0.75p to 17.5p.

Arden Partners’ analyst Nick Bubb said investors should not expect a sale of HMV Canada to raise much money.

“Hilco will pay nothing for HMV Canada, which is now moving into loss.

“There is no alternative to having a big rights issue, so caveat emptor,” he said, referring to the Latin for ‘let the buyer beware’.

Billionaire Russian businessman Alexander Mamut has been linked with a bid for Waterstone’s, with the imminent initial public offering (IPO) of his mobile phone retail business Euroset set to bolster his war chest.

HMV said its lending banks remain supportive and it is in regular and constructive dialogue with them.

The group saw sales drop 13.6 per cent in UK and Ireland over Christmas and has since been hit by supplier troubles as firms struggle to gain credit insurance due to fears over HMV’s trading.

It recently warned that it expects borrowings to be not less than £130m, significantly higher than expected.

HMV is facing increasing competition from online retailers and supermarkets in its core CD and DVD markets.

The group has been broadening its product mix as part of a fightback, branching into new areas such as technology and entertainment-related product sales.