Tim edges closer to Waterstone’s coup

Former Penguin c.e.o. Forbes Watson, who would become chief executive of Waterstone’s if the deal went through, said that the financing was "in place" and fully underwritten by private equity house Lazard.
The pair spent Wednesday in talks with the HMV board’s financial advisers and key institutional shareholders Barclays, Aberdeen Asset Managers, Brandes, Morley and M&G. "There’s a general recognition that this is a real, serious offer on the table," Forbes Watson said.
One proviso to the £280m price is that Waterstone’s earnings before interest, tax, depreciation and amortisation, which were £38m last year, had not slipped below a "floor level". Another condition is that HMV does not pursue its acquisition of Ottakar’s after the Competition Commission publishes its final verdict in early May.
The pair originally approached HMV in February with an indicative offer, but went public this week to force a response. They have asked the HMV board to open its books and have requested a four-week exclusivity period.
Forbes Watson also claimed to be winning over influential City analysts such as Richard Ratner and Nick Bubb--who initially dismissed the approach as a sideshow. "They believe it will happen. Their thoughts are moving on to the value of the remaining HMV chain."
One analyst said: "At £280m [Tim] is not only paying a premium for the business, he’s adding another premium on because he wants this badly. By adding on Ottakar’s, Waterstone’s wouldn’t be in a better position, it will only delay the impact of competitors. If shareholders don’t take this money now they’re taking a risk."
But David Stoddart of Teather & Greenwood disagreed: "We have been here before. I daresay Tim is serious but he hasn’t given a price--he’s said ’up to £280m’, which, put another way, means less. Shareholders’ preferred option appears at this stage to be to acquire Ottakar’s."
Some Waterstone’s staff welcomed the possible return of the founder, but others were more cautious. One head office manager said: "We think that we’ve moved on, and a lot of people here don’t think he [Waterstone] understands the business. "
The chief executive of one publishing house said: "This would be the optimum result from the mess of the past 12 months. My big worry is that HMV will suck up Waterstone’s cashflow to prop up the music market. It will be great if Tim can pull this off."