Private equity firm Permira eyes HMV
HMV could be the potential target for a takeover by private equity house Permira.
But city analysts are uncertain over the rumoured deal. Steve Davies from Numis said” We will see what response (if any) we get from the company, but our initial reaction is one of scepticism that a deal could be completed at these levels.We have talked on numerous occasions about the competitive pressures which HMV is facing right now and which 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 2/3 years time in order to generate their required returns.
If music (and video) 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.The second point to make is that none of the press reports suggest that Alan Giles or any of the top HMV team is working with Permira yet. It would be unusual to do a take-private in retail without the existing management team.
If Permira do put their heads above the parapet and begin discussions with HMV management, they may find that they get a fairly gloomy prognosis about the assumptions to put in their model and this would clearly affect the price that they would pay.”
HMV is currently bidding for bookseller Ottakar’s, a competitor of its Waterstone’s chain. The aquisition has been referred to the Competition Commission and press reports over the weekend suggested that it is unclear what would happen if Permira aquired HMV.
