HMV (LSE: HMV) has sold its Waterstone’s book chain to a fund controlled by Russian billionaire Alexander Mamut for £53 ($85.79)m.
Last week HMV alerted the market to interest in Waterstone’s from multiple bidders although it emerged that Mamut, who counts Chelsea FC owner Roman Abramovich among his friends, was considered to be the front runner.
Mamut, who already owns San Francisco-based social networking site LiveJournal, already holds a 6.7% stake in HMV.
Mamut has bought the business for cash through A&NN Capital Fund Management, a company controlled by a trust in which Mamut has an interest. The deal is expected to be completed by the end of June.
HMV Group, which issued its third profit warning in April this year, put the 314-strong Waterstone’s chain up for sale in March.
The company said on Friday that the sale represents an “important step towards strengthening the capital structure of the remaining HMV Group”.
HMV said that it needs to reduce its borrowing requirements in the short term to “achieve a satisfactory refinancing” and “has concluded that the most timely and effective way to achieve this is through the disposal of Waterstone’s”.
“We expect this deal to enable the Group to achieve a reduction in the group’s borrowing requirements, and, in turn, focus on plans for transforming the HMV Group into a broad-based entertainment business,” said Simon Fox, the chief executive of HMV Group.
The proceeds of the sale – which will see £40 ($64.75)m paid on completion in June and £13 ($21.04)m in October – will be largely used to reduce HMV’s borrowing requirements.
“We are extremely pleased to have reached an agreement to acquire Waterstone’s and its great heritage,” said Mamut. “I believe that our investment and strategy will secure a dynamic future for the UK’s largest bookshop chain and I look forward to working with its booksellers in building on the principle of excellent bookselling, which is at the very heart of the business.”
HMV said that the sale is conditional on shareholder approval and also from the pension trustee, the pensions regulator as well as HMV’s banks “including a renegotiation of the group’s lending facilities”.
“Any such transaction would likely be subject to, amongst other things, shareholder, lending bank and pension trustee approval,” the company said.
“There can be no certainty that any transaction will be concluded and a further announcement will be made as and when appropriate.”
HMV Group reported that total group sales continued to slide down 15.2% year-on-year in the 17 weeks to the of April. Within this HMV UK & Ireland saw sales fall 18.8% with international operations, in Canada, Hong Kong and Singapore, down 6.7%. Waterstone’s reported a sales fall of 11.3%.
The company said in the 53 weeks to the end of April group profits before tax and exceptional items would be about £28.5 ($46.13)m. Year end net debt is expected to be £170 ($275.17)m.
This article originally appeared in MediaGuardian.