Waterstone's sold, Daunt in, Myers out

The Bookseller -20.05.11 | Lisa Campbell, Philip Jones and Graeme Neill

Waterstone's has been sold to Alexander Mamut's A&NN Group for £53m.

In a surprise move, James Daunt will run the bookseller as its managing director when the deal completes, with current m.d. Dominic Myers to take a new role within its former parent HMV Group. The new owner has promised "an undiluted commitment to books and bookselling".

HMV Group made the announcement to the City this morning. Upon completion of the deal, £40m will be paid with another £13m paid on 31st October. Daunt Books itself will remain independently run, as now, by its existing shop management. There is no mention of any involvement from the chain's founder Tim Waterstone, who it had been widely reported was working on the deal with Mamut.

The new owner said Daunt intended to oversee a comprehensive review of the business and operations of the bookseller. Daunt told The Bookseller: “The main observation I would make is that I am on the outside still and I don’t come in until 2nd July. I’m not the money guy, I am coming in to run it . . . This is an important investment from A&NN which will secure a dynamic future for the UK’s largest bookshop chain. I look forward to working with Alexander and with the Waterstone’s team, and in particular to the challenge of restoring a faith in excellent bookselling to the heart of the business."

In an email to staff, Myers said he had “enjoyed” his time at Waterstone’s and thanked staff for their skill and support. He said: “Everything that has been done in the last year has been achieved through the skill, motivation and sheer hard work of the fantastic team at Waterstone's—I thank them for their massive support and am delighted that this process will now allow them to really flourish. I'm sure the entire industry will join me in also wishing my successor well.”

HMV’s c.e.o Simon Fox hailed Myers’ “inspirational” leadership and said he had “re-energised” the store and “the bookselling skills for which our stores are renowned have been successfully revived”. He added: “Dominic and his highly skilled team have also resolved many of the operational challenges faced by the company, including the hub. As a result, the profitability of Waterstone's has improved significantly compared to the prior year, and Dominic's leadership of the business in a challenging time for the industry has earned the recognition of our book trade partners.”

The detail of the business plan and forward strategy would be "refined subsequently". Mamut said his investment had been inspired and motivated by the opportunity to refocus the core business of bookselling towards a renewed customer responsiveness. He said: "The opportunity ahead to reposition Waterstone’s as a regional and local community-orientated bookseller is an exciting one. The business enjoys a great loyalty from its customers and I believe that there is considerable integrity and value in the brand." Of Daunt, he said: "I am equally delighted that we will have in James Daunt an m.d. who shares my belief that Waterstone’s future success lies in an undiluted commitment to books and bookselling."

The deal, which HMV Group expects to go through by the end of June, is subject to shareholder approval, as well as the banks that have lent HMV Group cash. The retailer said banks were supportive of the disposal and were considering it in the light of the renegotiation of terms of money leant to HMV Group. However, it warned if it cannot renegotiate its debt, the sale will not go ahead.

HMV Group also revealed this morning Waterstone's had a like-for-like sales decline of 3.8% for the 12 months to the end of April with total sales down 4%. For the 17 weeks ending 30th April, like-for-like sales were down 8.4% and total sales down 11.3%. HMV Group blamed a "weak" book market and loss of share for the decline.
Nielsen BookScan figures show Waterstone's was performing worse than the wider book market. TCM sales were down 2.3% (£39m) year on year to £1.68bn, for the 52 weeks to 30th April. This year's TCM sales for the 17 weeks to 30th April were down 3.4% (£15.7m) year on year to £447m.
Mamut added: "We are extremely pleased to have reached an agreement to acquire Waterstone's and its great heritage. I believe that our investment and strategy will secure a dynamic future for the UK's largest selling bookshop chain and I look forward to working with its booksellers in building on the principle of excellent bookselling which is at the very heart of the business."

Verdict senior retail analyst Matt Piner said Mamut's purchase constituted a "gamble". He said: "Physical book stores have more of a lure than music stores, but this has not stopped them losing share to Amazon, supermarkets and latterly, e-readers and kindles. Mamut has shown real belief in the value of being the last man standing. In order for his investment to be successful he will have to continue restoring the specialist appeal of Waterstone's, as well as finding ways of ensuring it remains relevant as the digital market in particular continues to grow.”