HMV made to wait on takeover decision

HMV was today frustrated in its efforts for a quick ruling on whether its £96.4m (€142.7m) offer for Ottakar’s damages competition in the market for books.

The owner of the Waterstone’s chain has been told by the UK's Office of Fair Trading (OFT) that it will not make a decision on whether to refer the deal to the Competition Commission before December 2.

This was later than the November 18 deadline that HMV had set for shareholders to accept its 440p-a-share offer, which trumped a management buyout in September and has won the recommendation of independent directors of the Ottakar’s board.

Analysts believe the OFT has been deluged with representations from authors and publishers that a marriage of Waterstone’s and Ottakar’s would have a negative impact.

The Society of Authors confirmed meetings had taken place with the OFT over its concerns and it is understood the Publishers Association has also voiced its opposition to the deal.

Mark Le Fanu, general secretary of the Society, said its 7,500 members were “extremely worried” that a combination of Ottakar’s and Waterstone’s would account for more than 50% of all books sold on the UK high street.

“The problem for authors is that supermarkets shift a lot of books, but they tend to be a very narrow range of titles,” he said.

“The whole commissioning of books by publishers is very much dependent on decisions made by high street retailers.”

The fear among authors is that niche books and works with a specific regional interest will be eclipsed by just a handful of best-sellers, he said.

At the same time, Waterstone’s would be in a stronger position to wring discounts from publishers and Mr Le Fanu said “that will have an impact on authors’ royalties”.

A combined business of Ottakar’s and Waterstone’s will have 325 stores in the UK.

HMV rejects the idea that the takeover deal lessens competition in the book market significantly, citing industry data that gives the combined group a 23.6% share of the book market.

It claims a deal will enable Waterstone’s to meet the challenge from supermarkets or online retailers such as Amazon that are not saddled with rents for high street shops.

Retail expert Richard Ratner, of broker Seymour Pierce, stuck by the view that the deal will be waved through by the OFT.

He said: “We are hearing that the publishers have threatened to appeal any decision which goes against them, thus the OFT is taking its time to ensure that it covers its back by reading all representations and clearly justifying its eventual decision.”

A spokesman for the OFT confirmed that a decision was not anticipated before December 2, but declined to say why this was the case.

The OFT has an administrative target of making a decision within 40 working days of receiving submissions from parties in 90% of all takeover deals.