HMV was left "bemused" yesterday after Tim Waterstone suddenly abandoned his bid to buy back the book chain he founded.
A week after tabling an offer worth up to £280m for the Waterstone's book chain, Mr Waterstone walked away, blaming "ludicrous" conditions set by the music shop group.
HMV said that Lazard Equity Partners, the bankers providing finance for the bid, had withdrawn its support for Mr Waterstone's bid. "Someone didn't clear their lines with the boss in New York," a source close to the deal said.
The music shop chain appeared ready to do a deal to return the 190 Waterstone bookshops up and down the country to their founder, who believes the business is being drastically mismanaged.
The company was prepared to open the finances for examination by the bidding consortium, which comprised Mr Waterstone, his friend Anthony Forbes Watson and Lazard.
But it insisted on a clause that would have prevented Lazard using the information it acquired during due diligence to launch a bid for the entire HMV business.
Alan Giles, the chief executive of HMV, said of the failed deal: "I wouldn't say I was disappointed. I am bemused that it has ended like it has, but we have been here before. On a regular basis he approaches us, and we follow it through to find there is no financing. We decided this time that there was."
Mr Waterstone declined to be interviewed yesterday. A source close to him said: "He's not embarrassed. They don't want to sell the business."
Mr Waterstone hasn't ruled out returning to the deal yet again, but after six failed attempts to take control of the company he founded in 1982, he may struggle to attract investors.
Waterstone's made profit of £26m last year on sales of £440m - a result the founder claims was poor.
A statement by Mr Waterstone and Mr Forbes Watson said the unacceptable conditions imposed by HMV included that due diligence be completed in 14 days, that there be no exclusivity, and that the sale could be terminated at any time, thereby barring the consortium from making another offer within the next year.
Mr Waterstone said in the statement: "No potential acquirer could reasonably have accepted these conditions."
HMV said it would be happy to consider other "credible" bids for the Waterstone's chain.
It is waiting for the outcome of a ruling by competition watchdogs on 22 May before it decides whether to push ahead with a bid for Ottakar's, a rival independent bookseller.
HMV agreed to pay £96.4m for Ottakar's last year before the Competition Commission stepped in and referred the deal to an inquiry.
If HMV does make another offer, it could face a counter bid from WH Smith, said analysts.Reuse content