HMV rejects £762m offer from private-equity firm Permira

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The Independent Online

The music and bookshop group HMV rejected a £762m bid from the private-equity group Permira last night as too mean. The offer, tabled earlier in the day, valued HMV shares at only 6p more than yesterday's 184p closing price. However, the shares had jumped almost 20 per cent last week after an admission from HMV that it had received an informal approach.

HMV said in a statement: "The board has concluded that the proposal undervalues HMV Group. As such, HMV Group will not be entering into discussions with Permira Advisers Limited with regard to the proposal."

Richard Ratner, an analyst at Seymour Pierce, said Permira's offer was less than expected. He does not expect a more generous bid to be forthcoming.

Permira is considering its next move. It has lined up Roger Parry, who runs the UK arm of the US media giant Clear Channel, to run the struggling retailer should it win control. A spokesman for the private-equity group said: "Permira has spent many months looking at the HMV business and sees a business with very serious structural difficulties. It believes the whole HMV business needs a radical rethink, and on that basis 190p represents a full and fair price."

HMV, which also owns the Waterstone's books chain, has looked increasingly vulnerable as sales and shares lost ground.

The company, which has been hit by tough competition from supermarkets and the internet, admitted that sales slumped over the crucial Christmas period. Cheaper rivals are ravaging not only its sales of chart music, but also of back catalogues, and threatening its status as a specialist music retailer.

The rise of the cyberspace high street cost HMV its first-half profits, much of its festive season profit margin and the resignation of its chief executive, Alan Giles. It also fuelled speculation that it could split its core music chain from Waterstone's.

Like-for-like sales fell 2.7 per cent this Christmas compared with last. Pre-tax profits in the 26 weeks to the end of October were just £200,000 - down from £10.5m last year.

HMV plans to buy the independent bookseller Ottakar's. Last month, the Competition Commission said it would report provisional findings on the proposed acquisition by the end of next month.

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