HMV's talks with Mamut over Waterstone's on hold

James Thompson
Friday 13 May 2011 00:00
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HMV's efforts to sell its Waterstone's book business are being stymied by a stand-off between the beleaguered entertainment group's banks and the potential buyer, Alexander Mamut, over price. The Russian billionaire is thought to have offered between £35m and £40m to acquire the 297-store bookseller but HMV's banks want as much as £70m for the chain. Mr Mamut's exclusivity period on bidding for Waterstone's has ended and talks have not now taken place for more than a week. While the oligarch may still complete a deal, other parties are thought to have approached HMV about a deal for Waterstone's.

Mr Mamut, who owns 6 per cent of HMV, is being advised by Credit Suisse. HMV, which declined to comment, is working with Nomura. The retailer's consortium of banks want back £75m in total and HMV is likely to raise less than £5m by selling its 128-store Canadian business. HMV is therefore under intense pressure from its banks to sell Waterstone's to be able to restructure its debt of more than £130m before the end of the month.

At the time of its third profit warning this year in April, HMV said its consortium of lenders – led by Lloyds and Royal Bank of Scotland – had extended its annual banking covenant tests from its year end on 30 April to 2 July. If HMV – which was expected to have delivered profits of £30m for the year just ended – cannot sell Waterstone's, it may be forced to implement a controversial insolvency procedure to slash its property costs.

On 22 April, HMV admitted that it was considering a company voluntary arrangement. This could see the group attempt to close a large number of its stores. Shares in HMV closed at 10p, just above the all-time low of 9.8p on 10 May. Its market capitalisation is just £42.36m.

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