HMV cleared by watchdog to bid for Ottakar's

Click to follow
The Independent Online

The competition watchdoggave the green light yesterday for the bookseller Waterstone's to swallow its smaller, independent rival Ottakar's.

The provisional verdict of a three-month investigation by the Competition Commission - that a takeover by HMV, the owner of Waterstone's, will not reduce competition by much - is likely to dismay authors, if not the City.

When HMV's £96.8m bid was accepted by Ottakar's in September, a flurry of publishers and high-profile writers claimed the deal would narrow the choice of titles available on the high street.

The commission disagreed, finding an amalgamation of the two would not create any "substantial lessening of competition", even in towns with a Waterstone's and an Ottakar's.

Diana Guy, who led the inquiry, said in a statement: "There is growing competition from supermarkets and internet retailers in terms of both price and range, so the merged company would have little ability to raise prices either on bestsellers or other titles."

The commission also agreed with HMV that such a deal would see Waterstone's heavier distribution clout push a wider range of books into Ottakar's shops.

HMV's offer of 440p per Ottakar's share lapsed in December, when the proposal was referred to the commission by the Office of Fair Trading. The high street music group had trumped a management buyout attempt, led by the managing director James Heneage, pitched at 400p a share.

HMV, advised by the Swiss investment bank UBS, is expected to keep its powder dry until the commission publishes its final findings on 22 May. Then it is likely to return with another offer, significantly lower than before, since Ottaker's trading has deteriorated significantly since HMV first made its interest known. Nick Bubb, an analyst at the investment bank Evolution Group, thought HMV need not pay more than 300p a share to secure an agreed takeover with Ottakar's board.

Other experts, including Richard Ratner at Seymour Pierce, told clients HMV would not need to bid more than 400p a share unless a rival predator, such as WH Smith, emerged.

He, like HMV, applauded the commission's decision, congratulating the watchdog for rejecting "hypocritical" arguments that a combined group would choke the availability of less popular books. "The publishers have been shedding crocodile tears for the authors and the public," he said. "At the same time, they are supplying Amazon and the supermarkets at lower prices than the specialist booksellers are getting."

The prospect of a second bid from HMV spurred Ottakar's shares 25.75p to 350.75p, valuing it at £71.8m. HMV shares eased 0.25p to 173.75p.

HMV has the been the subject of takeover interest from the private-equity group Permira. Talks broke down over price.

Comments