UK-listed entertainment retailer HMV Group has finally agreed the long-expected disposal of its Japanese operation, selling it to buyout group DSM Investments for ¥17 billion (€104 million; $143 million).
The business has effectively been up for sale since March, when HMV announced a strategic review of the division. A number of trade rivals were also linked to possible bids, including Tower Records and Capital Convenience Club.
The HMV group as a whole has been coming under pressure to cut costs as the increasing use of internet downloads has hit the sales of physical CDs and DVDs. It will use the proceeds of the sale to pay down debt. Chief executive Simon Fox said the sale “enables the Group to focus on the markets where it has market-leading positions”.
DSM is a special purpose vehicle owned by the principal investment arm of Japanese investment bank Daiwa Securities SMBC Principal Investments, a joint venture between Daiwa Securities and Sumitomo Mitsui Financial Group. The division, which began operations in October 2001, also invests in real estate and distressed loans as well as private equity.
The deal is expected to close by the end of August. HMV was advised by Japan-based Shinsei Bank, which famously provided a huge return for US investor Ripplewood Holdings after it turned the business around.
In February and March last year, HMV turned down two take-private bids from UK buyout firm Permira. The retailer said that the second bid of 210 pence per share, which valued the group at about £842 million, “continues to undervalue the group”. At 10:30 BST today, HMV was trading at 107.25 pence, giving the group a market capitalisation of £432 million.