HMV announces £1bn float

Music group HMV is to float on the London Stock Exchange in the next few months, it was announced today.

The group, which owns the Waterstone's bookshop chain, had been long expected to announce its flotation plans, and there has been speculation the firm could float with a price tag of between £800 million and £1 billion.

Alan Giles, chief executive said: "The flotation of HMV Group is an important milestone in our quest to become the most successful international retailer of music, books and video and allows us to reward our employees by giving them the opportunity to become shareholders in the group.

"As a quoted company we intend to build on our success to date and take full advantage of the substantial opportunities available to us to strengthen the group's market position, exploit new product opportunities and embrace new distribution channels."

The group, which is part–owned by music group EMI, said the listing was subject to market conditions, but it expects the flotation to be completed before the

end of June.

Shares will be sold to institutional investors in the UK and internationally, as well as private investors in the UK, and staff.

The group will use proceeds to reduce debt, and for general corporate purposes.

Eric Nicoli, chairman of EMI said: "We welcome HMV's announcement of its intention to float, which ties in with EMI's long–stated aims of maximising the value for our shareholders in this investment.

"We believe that HMV has an excellent business and strong growth prospects, and expect to continue as a significant shareholder in HMV following the flotation."

EMI owns 42.65% of HMV and intends to realise a proportion of its stake on flotation.

HMV owns 325 music stores in nine countries and 197 Waterstone's book shops, mainly in the UK and Ireland.

The group was formed four years ago when EMI spun off HMV and Dillons and the new business bought Waterstone's from WH Smith.

The company, which has debts of £347.6 million, had been expected to announce its flotation plans when trading and profits improved.

Last year it announced a £21 million loss after costs of restructuring its Waterstone's chain, which has faced a tough time and seen much speculation over its future. Founder Tim Waterstone has staged an attempt to buy the business back.

However HMV's flotation plans were today boosted by upbeat figures for the last quarter.

For the third quarter, to January 26 – which includes the key Christmas trading period – like–for–like sales rose 8.1%, with HMV up 9.1% and Waterstone's up 5.2 per cent.

Sales at HMV were boosted by records by Robbie Williams and Kylie Minogue, and sales of DVDs such as Shrek and Bridget Jones's Diary.

At Waterstone's, books selling well included titles by Ian McEwan, Stephen Hawking and Jamie Oliver.

Overall, sales at the group during the quarter rose 8.7 per cent to £594.8 million. Pre–tax profits were £63.2 million, up from £50.2 million for the same period last year.

Mr Giles said: "This is our key trading quarter and I am delighted to be able to report it has been a success.

"The resulting effect of this quarter is record profits and borrowings substantially below the corresponding period last year."