Music retailer could face £800m takeover
Music and entertainment retailer HMV admitted this morning that is has received a 'preliminary approach from a third party', following widespread reports that it being sized up for potential takeover by private equity house Permira.

HMV, which traded poorly over Christmas, is thought by the venture capitalist to be worth about£800 million.

City analysts are sceptical over the mooted deal. Steve Davies at Numis said: 'The competitive pressures that HMV is facing are only going to get worse over time. From a private equity viewpoint, the biggest hurdle is who they are going to sell the business to in two or three years' time in order to generate the required returns.

'If music downloading continues to take a larger share of the market and the DVD market continues to slow down, then the HMV stores will be a shadow of their former selves by then.'

Davies also pointed out there is no suggestion that any of the top HMV team is working with Permira, but noted: 'HMV certainly trades on a low multiple, albeit one that is well justified in our view.'

HMV is itself bidding for bookseller Ottakar's, a rival of its Waterstone's chain. The proposed deal has been referred to the Competition Commission and it is unclear what would happen were Permira to buy HMV in the meantime.

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