HMV Rises on Reports Mamut, Permira Consider Breakup

HMV Group Plc, the U.K.’s biggest retailer of DVDs and CDs, rose in London trading after Sky News said a shareholder was looking at options including a breakup of the company.

HMV climbed 8.8 percent. Alexander Mamut hired Credit Suisse Group AG to consider options, Sky News reported, without attribution. Mamut may also consider a purchase of its Waterstone’s bookstore unit, Sky said.

Separately, Retail Week said Permira Advisers LLP was considering a possible offer. Roger Parry, who was involved with the leveraged buyout firm’s 2006 bid for HMV, may be working with Permira, the trade magazine said. Chris Davison, a Permira spokesman, said the firm had no comment on the report.

HMV could be worth between 141 million pounds ($228 million) and 186 million pounds in a breakup, yet only to a third party, Oriel Securities analysts led by Ben Hunt wrote in a Jan. 31 note to investors. A publicly traded company would find it hard to exit HMV leases as they expire, a step which may become necessary if sales densities keep dropping, they wrote.

“In order to recognize HMV’s intrinsic value, it is necessary for a third party to take a controlling stake in the company,” wrote the Oriel analysts, who have a “sell” recommendation on HMV.

HMV increased 2 pence to 24.75 pence. The shares have declined 23 percent so far this year, giving it a market value of 104.8 million pounds.

The Maidenhead, England-based company is closing 60 stores after saying that an April banking covenant test will be “tight” following disappointing holiday-season sales. An HMV spokesman, Paul Barker, said last month that Waterstone’s has not been put up for sale.

An outside spokesman for HMV who wouldn’t allow his name to be used, citing the company’s policy, said the retailer had no comment on the reports. Mamut, owner of Russia’s OAO Polymetal, owns 6.1 percent of HMV’s shares.

To contact the reporter on this story: David Altaner in London at daltaner@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge in London at Ckeatinge@bloomberg.net

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