Management at Mama Group, the company that runs live music venues including the Hammersmith Apollo, yesterday backed a takeover deal worth £46m tabled by HMV.
The DVD, music and games retailer, which already holds an 8.2 per cent stake in Mama, is keen to diversify its operations. The two companies also operate a live music joint venture.
Simon Fox, chief executive of HMV, said: "I am delighted that we have agreed terms for a recommended offer. Our joint venture has worked well since its formation and the full combination of HMV and Mama will enable us to accelerate our growth into live music."
However, a stumbling block could come in the form of Silvio Scaglia, an Italian entrepreneur whose SMS Finance is Mama's biggest shareholder and who launched a £38.4m bid for the group earlier this month. Mr Scaglia, a former chief executive of Italian broadband group Fastweb, owns 29.8 per cent, and is yet to announce his intentions concerning the HMV bid.
HMV and Mama have been working hard to secure an agreement before Christmas, and in a statement yesterday, Mama directors unanimously recommended HMV's 5.4p per share offer. The bid is a premium of over 23 per cent to the closing price the day before SMS made its first bid.
Two of Mama's major shareholders, Schroder Investment Management and Herald Investment Trust, have already agreed to sell their stake, a combined 15 per cent, to HMV.
HMV said the acquisition represented a "further significant step, as it continues the transformation of the HMV business begun in 2007". In January, the retailer paid £18.25m for a 50 per cent stake in Mean Fiddler, the joint venture with Mama.
A spokesman for the group added: "HMV believes it will be able to accelerate the growth of the live venues and the festivals business by bringing them under its ownership and will also be able to drive further cost and revenue synergies out of operating them alongside HMV's existing businesses."
Adam Driscoll and Dean James, co-chief executives of Mama, which represents artists including Franz Ferdinand and Kaiser Chiefs, said: "There are even greater opportunities to develop and evolve the live music operations, alongside our artist services business, within the HMV group of businesses. We are delighted that HMV has recognised the financial and strategic value of the Mama Group via this offer".