Zooped.com - HMV buys into music venues

HMV buys into music venues

Posted by: Zooped, January 15th, 2009

HMV will pay almost £20m to become the part owner of 11 live music venues in the UK, funding its venture with an equity placement.

The music and books retailer said yesterday it planned an equity placement of up to 5 per cent of its issued capital to fund the plan and had seen “strong support” from big shareholders.

It will invest an initial £18.3m in a 50-50 joint venture with MAMA, the country’s second-biggest operator of live music venues, which will see it rename some venues including the Hammersmith Apollo, which will become the “HMV Apollo”.

“The physical music market is changing structurally and we need to diversify,” said Simon Fox, chief executive. He said live music was a buoyant part of the UK music market and worth about £1bn a year, adding it would “deliver a younger demographic to our brand”.

HMV will take 50 per cent of the profit from the 11 venues, generated by renting them out to promoters as well as through sales made within them. Mr Fox said the company would try to sell HMV merchandise in the venues wherever it could. It will also sell tickets for the venues, as well as other events, through its stores and website using an arrangement with Seatem, the ticketing agency.

HMV could have funded the investment through its £220m bank facility, Mr Fox said, but decided the “time was right” to do a small equity placement.

The placement was priced at 122½p, a 4 per cent dicount to Wednesday’s closing price, and will raise £25m. The shares opened nearly 10 per cent higher on Thursday at 140p.

The company also said on Wednesday, in a statement released after the market had closed, it would purchase 14 stores from Zavvi, a rival that fell into administration last month, for £700,000, and take on 269 jobs from the failed chain.

HMV’s moves came as it announced solid trading figures for the Christmas period. Sales across the group, which also owns the Waterstone’s book chain, rose 0.5 per cent in the five weeks to January 3 after stripping out the effect of new store openings.

Its HMV stores in the UK and Ireland did best, with like-for-like sales up 3 per cent, while like-for-like sales at Waterstone’s fell 2 per cent. Mr Fox said the company was on track to meet expectations for full-year profits. Analysts expect the company to make about £58m.

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HMV will pay almost £20m to become the part owner of 11 live music venues in the UK, funding its venture with an equity placement.

The music and books retailer said yesterday it planned an equity placement of up to 5 per cent of its issued capital to fund the plan and had seen "strong support" from big shareholders.

It will invest an initial £18.3m in a 50-50 joint venture with MAMA, the country's second-biggest operator of live music venues, which will see it rename some venues including the Hammersmith Apollo, which will become the "HMV Apollo".

"The physical music market is changing structurally and we need to diversify," said Simon Fox, chief executive. He said live music was a buoyant part of the UK music market and worth about £1bn a year, adding it would "deliver a younger demographic to our brand".

HMV could have funded the investment through its £220m bank facility, Mr Fox said, but decided the "time was right" to do a small equity placement.

The placement was priced at 122½p, a 4 per cent dicount to Wednesday’s closing price, and will raise £25m. The shares opened nearly 10 per cent higher on Thursday at 140p.

HMV's moves came as it announced solid trading figures for the Christmas period. Sales across the group, which also owns the Waterstone's book chain, rose 0.5 per cent in the five weeks to January 3 after stripping out the effect of new store openings.

Its HMV stores in the UK and Ireland did best, with like-for-like sales up 3 per cent, while like-for-like sales at Waterstone's fell 2 per cent. Mr Fox said the company was on track to meet expectations for full-year profits. Analysts expect the company to make about £58m.