Music giant HMV has expanded its reach further into live music gigs. HMV Group is has formed a joint venture with MAMA, Britain's second-biggest concert venue-owner.
The HMV Group will fund the 50:50 joint venture with a share placement worth up to 5 per cent of the music chain. The share placement is expected to raise around £20 million. The new company will operate 11 venues. The deal will also mean the famous Hammersmith Apollo becomes the HMV Apollo.
In the year to 31 July 2008, the 11 venues attracted about two million visits, and had combined revenues of £20.25m, with operating profits of £2.24 million.
HMV is also setting up a division to sell tickets for events at these and other venues.
HMV also said it was buying 14 stores from Zavvi, the former Virgin Megastores chain, which collapsed at the end of last year, preserving 269 jobs. Separately Zavvi's administrators Ernst & Young announced the closure of another 18 stores resulting in 353 redundancies. Ernst & Young shut 22 Zavvi stores last week and hopes of finding a buyer for the remaining 74 stores are fading.
Music, games and DVD chain Zavvi suffered after the collapse of its main supplier - Woolworths' unit Entertainment UK (EUK) which went into administration in late November.
Since then, Zavvi has had difficulties in sourcing stock and has been forced to enter new trading arrangements.
Funding the expansion
HMV Group has announced its intention to conduct a non-pre-emptive placing of up to approximately 20 million new ordinary shares of one pence each ("Placing Shares"), representing up to five per cent. of the Company's existing issued share capital (the "Placing").
The Company's major shareholders have already indicated significant support for the offering.
The Placing, for which Citigroup Global Markets U.K. Equity Limited and Nomura International plc are acting as joint brokers and joint placing agents (the "Joint Brokers"), will be the subject of an accelerated bookbuild which will be launched immediately following this Announcement.
Proceeds of the Placing will be used to fund HMV's entry into the fast growing live music market and the acquisition of 14 Zavvi stores from the administrators (the "Transactions") as set out in an announcement made today by the Company and, together with its recently agreed £220m bank facility to 2011, will provide for the maintenance of a strong and prudent balance sheet.