Mamut Takes More Of HMV

Having seen the value of HMV tumble by a third in the course of a day’s trading, Russian oligarch Alexander Mamut’s decision to increase his stake in the multi-faceted British entertainment giant has increased speculation that he’s lining up a takeover.

First-half figures announced Dec. 9 showed HMV’s sales have fallen 16 percent. The share price tumbled a similar amount to 36.5 pence, prompting Mamut to increase his stake in the company from 3.5 percent to 5 percent.

It’s the third time in three months that the Russian – estimated to be worth $1.5 billion by Forbes – has upped his HMV stake as the market appears to have doubted its strategy of expanding beyond music retail and taking on venue and festival ownership and artist management.

HMV chief exec Simon Fox believes diversification is the best way forward and needs to be accelerated, but shareholders and many business analysts believe he’s climbing up the wrong tree.

“Moves to diversify the product offering smack of desperation, with competition in clothing and electrical products already hugely intense,” Keith Bowman, an analyst with broker Hargreaves Lansdown, told The Sunday Times.

He said the last set of results did little to ease fears that that HMV is “slowly being consigned to the history books.”

Over the six months ending Oct. 23, pre-tax losses at HMV widened from £24.9 million to £41.3 million as like-for-like group sales dropped 16 percent to £749.5 million.

Net debt went up from £88.1 million to £151.6 million, largely because of the £47 million HMV paid for Mama Group in January.

Financial Times said Mamut may well be upping his stake in preparation for a bid, but also argued that he may simply believe the current share price – which hovered around the 33.5 pence mark Dec. 13 – seriously undervalues the company.

Peter Smedley, an analyst at Charles Stanley, summed up the gamble by telling FT that HMV’s share price implied that it was either “priced for failure” or “outstandingly cheap.”

The latest 16 percent drop means the value of HMV shares has fallen 75 percent over the past 18 months.

Chris Weafer, chief strategist at Uralsib Capital, the Moscow investment bank, told FT the obvious move for Mamut would be to expand HMV into Russia, as the country had no large-scale retail equivalent.