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Waterstone's next chapter: A ?43m bid by a Russian billionaire

Russian billionaire Alexander Mamut has finally tabled a bid to buy the Waterstone’s books chain from troubled music retailer HMV.

The ?43m cash offer came after months of negotiations, but is significantly lower than the ?70m valuation HMV boss Simon Fox has slapped on the bookstores.

Mamut has been working on an offer with friend Tim Waterstone, who founded the chain that bears his name in the 1980s.

If successful, their bid would herald the break-up of struggling HMV.


The group has been left reeling following a string of profits warnings over the past year, having been slow to react to shoppers buying their tunes online.

It is in desperate need of a cash injection to prevent it from breaching key loan agreements with its banks. Fox appointed investment bank Nomura to explore options for the Waterstone’s books chain.

A deadline for bids expired yesterday. While there has been interest from private equity firms it is unclear whether any competing bids have been received. Sources close to HMV suggest it considers Mamut’s ?43m offer as low ball, but sources close to the Russian insist the offer has not been rejected and ‘negotiations continue’.

The 300-store Waterstone’s chain has recently been turned around and expected to contribute ?5m to annual profits.

In a new twist last night sources suggested Fox is now considering a Company Voluntary Arrangement as a way forward and has been sounding out creditors.

A CVA is used to rescue a company when it is insolvent yet has an underlying business that would be profitable in the future without having old debts holding it back. Fox had warned in January that HMV (up 0.75p to 10.75p) may breach its loan covenants – the conditions under which banks agree to keep lending it money.

Net debt almost doubled from ?88.1m to ?151m early last year after HMV bought Mama Group, which owns venues such as London’s Hammersmith Apollo.

Lenders have extended the deadline for a key financial health check until July to give Fox time to examine all his options.

In January some of its music and entertainment suppliers warned insurance covering CDs and DVDs provided on credit might be reduced.

Problems with credit insurance was one of the key factors in the collapse of Woolworths and Land of Leather. But JJB Sports, which had a similar issue in 2008, managed to pull through.

HMV last night confirmed ‘it is in advanced discussions regarding a potential sale of Waterstone’s.’

Source: DailyMail