It is thought that Mr Waterstone's Daisy & Tom children's stores will be included in the new company, though at a greatly reduced valuation.
The two Daisy & Tom stores are expected to be valued at just pounds 2m-pounds 3m. This is a fraction of the pounds 30m price tag which WH Smith claimed Mr Waterstone was attaching to the chain when he made his audacious pounds 1bn offer for the WH Smith group last autumn.
Daisy & Tom will be grouped together with Waterstone's and EMI's Dillons book stores and its HMV music chain. Some Dillons stores will be converted to the Waterstone's format. No decision has been made on further conversions but is expected that the Dillons name will survive in some form.
Tim Waterstone will be chairman of the new company but will not have a major operational role. The books business will be run by Alan Giles, Waterstone's chief executive, with HMV run by Stuart McAllister, its existing managing director.
Mr Waterstone will emerge from the deal with an equity stake in the new business as he is investing several millions. However, the main shareholders will be EMI and Advent International, the US venture capital group that is backing Mr Waterstone.
The plan is to de-merge the business into a seperately quoted company. EMI is thought to favour an early exit though it is not clear if Mr Waterstone will have a longer term role
The Waterstone's deal would lead to talks starting once more between WH Smith and Virgin over the Virgin-Our Price music business.
Virgin, which owns 25 per cent of the company, is interested in acquiring Smith's 75 per cent stake. It is understood that Smith's chief executive, Richard Handover, did not want to start negotiations until the Waterstone's deal was completed. A value of around pounds 135m is anticipated.Reuse content