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Business News Deals HMV Timeline Retail
HMV, snaps up 14 Zavvi stores, moves into live music with the help of MAMA
By CMU Editorial | Published on Thursday 15 January 2009
So not one but two rather interesting announcements from His Master’s Voice yesterday.
First confirmation that the entertainment retailer is buying 14 stores off its collapsing rival Zavvi in a move that will bring the HMV brand to various towns or shopping centres where it hasn’t previously had a presence.
Five of the fourteen are in Ireland – the Irish version of Zavvi having also gone into administration a week after its UK counterpart. That part of the deal will see HMV arrive in Dundalk, Dundrum, Limerick, Newbridge and at Dublin’s Liffey Valley shopping centre.
In the UK, HMV will takeover Zavvi stores in Bournemouth, Crewe, Glasgow (x2), Peterborough, Plymouth, Salisbury, Southend and Stockton-on-Tees. The deal should save about 269 Zavvi jobs.
Second, and perhaps more importantly, HMV announced it was forming a new joint venture with the ever-growing music enterprise the MAMA Group which will see the retailer move into the live music sector.
The two firms will become joint owners of a new company that will take the Mean Fiddler name (a name MAMA gained the rights to when it bought most of the Mean Fiddler venue network). That new company will in turn take ownership of 11 venues in the existing MAMA Group empire, namely The Hammersmith Apollo, The Forum, The Garage, Heaven, G-A-Y Bar, G-A-Y Late, The Borderline and the Jazz Café in London, plus The Edinburgh Picture House, The Birmingham Institute, and Aberdeen’s Moshulu. Some of those venues will incorporate the HMV brand into their names.
The deal will see HMV pay MAMA Group around about £18.25 million (the exact figure will depend on the new company’s financial performance in 2009). The two business partners will have a 50% stake each in the new company, which will be primarily run day to day by MAMA, though both parties will be involved into looking at possible new venue acquisitions to expand the empire.
Confirming the deal, MAMA chiefs Adam Driscoll and Dean James told CMU: “We are delighted to be entering this joint venture arrangement with HMV, the UK’s leading music retailer. This is a landmark deal that alters the face of the live venue business in the UK. The engagement of artist and fan is the key driver of the music industry. That engagement is at its most evident at live events. Our venues are already key destinations for artists, promoters and fans. This new partnership between MAMA and HMV enables that live experience to be augmented by enabling us to offer the artist and fans a range of other opportunities to interact”.
HMV CEO Simon Fox added: “Music is very much part of our DNA, and by extending the HMV brand into the growing live music and entertainment market, our customers will be able as never before to access and experience music in all of its forms via HMV. Our joint venture with MAMA Group to own and operate key venues in the UK uniquely positions HMV to offer our customers full access to live music. We have also today announced the development of HMV tickets which will enable us to offer our customers tickets to events at our Mean Fiddler Group venues as well as a range of other events. In addition, HMV will now be able offer to our existing and new live customers exciting bundled product offers, comprised of music CDs, DVDs, MP3 downloads, games, and related merchandise”.
For those of you wondering how HMV can afford to buy 14 Zavvi stores and half of a major new live music company, well, they are planning an equity placement, which basically means they will sell some new shares in the company.
Fox says they could have afforded to fund the two acquisitions using their overdraft facility but have decided creating and selling some new shares (which will equate to up to 5% of the business) is a better route. The CEO adds that the move has the support of the retailer’s bigger existing shareholders.
Back to Zavvi world, and with the HMV deal done the former Virgin Megastore chain now has 65 stores left in the UK and 6 in Ireland. Administrators Ernst & Young are apparently still confident they can sell some of that remaining network off as a going concern.
