HMV rejected a 190p-a-share bid from Permira, the private equity firm, yesterday, saying that it undervalued the book and music retail group.
Analysts said that Permira, which is understood to have been encouraged by the relatively weak wording of HMV’s statement rejecting the bid,would probably return with a higher offer.
It also emerged yesterday that Permira had signed up Roger Parry, the deputy chairman of Clear Media, the outdoor advertising company, to front its bid for HMV.
Although HMV’s board said in the statement that it would not enter into “any discussions” about the proposal, it said only that the offer “undervalues” the business.
One major shareholder in HMV backed the retailer’s board. He said: “The price is too low and I wouldn’t accept a bid at that level.”
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The shareholder said that he was unhappy about the conditions suggested by Permira, which has been working on a potential deal for the past five months. Other shareholders have said that they would be “happy” with 200p a share, given the uncertain outlook for HMV.
HMV admitted last week that it had received an approach about a possible offer, after reports that Permira was planning a 200p-a-share bid that would value the retailer at about £800 million.
Some analysts were surprised by the bid, given HMV’s recent poor performance as it struggles against competition from supermarkets and online retailers as well as slowing sales of DVDs.
However, Permira is swooping while HMV, which owns the Waterstone’s bookstore chain and the HMV music retailer, is vulnerable.
Kohlberg Kravis Roberts, the buyout company, has also examined the possibility of a bid, while Tim Waterstone, the retail entrepreneur, is known to be interested in buying back Waterstone’s, which he founded in 1982.