Powerhouse British music and entertainment retailer HMV has agreed to buy bookseller Ottakar's for a cut-price £62.8 million ($118 million).

Powerhouse British music and entertainment retailer HMV has agreed to buy bookseller Ottakar's for a cut-price £62.8 million ($118 million).

In a statement issued Wednesday (March 31) to the London Stock Exchange, HMV said it had agreed to pay 285 pence in cash for each Ottakar's share. The sum is well-below the 440p per share, £97 million ($182 million) deal, HMV had originally agreed to pay in September 2005 through its own Waterstone's books chain.

Earlier this month, the board of Ottakar's had rebuffed an HMV cash offer, stating it was at a price per share "materially below" its then-current share price.

In morning trading today, HMV stock was up 2.3% at 166 pence. Ottakar's was 0.52% lower at 285 pence.

HMV said the acquisition presented attractive synergies for the two businesses. "The strategic rationale for the acquisition of Ottakar's is now stronger than ever," said HMV Group CEO Alan Giles in today's statement. "A combined Waterstone's and Ottakar's business will create an exciting, quality bookseller, able to respond better to the increasingly competitive pressures of the retail market."

Following the transaction, the combination of Waterstone's and Ottakar's would account for roughly 336 U.K. stores and 24% of the market.

Giles described the deal as a "value-enhancing opportunity to all stakeholders," and said it was expected to be "earnings enhancing, pre-exceptionals, from the first full year of acquisition and to exceed our cost of capital by the end of the second full year."

Ottakar's executives explained that the decision comes in light of ongoing challenging trading conditions within the book retailing sector.

"Over the past year the book market has undergone a significant change with new levels of competition from the supermarkets and on-line retailers impacting all specialist booksellers and in particular those with insufficient scale to compete on equal terms," Ottakar's chairman Philip Dunne said in a statement.

HMV's original 440p per share offer was delayed after the approach was referred to regulator the Competition Commission on Dec. 6, 2005. The initial offer lapsed upon referral.

The CC on May 12, 2006 gave HMV the green light to make a new approach after declaring such a deal would not mean "substantially lessening of competition."

London-based Ottakar's was founded in 1987 by its current managing director James Heneage and Dunne. It currently has 141 outlets. The firm said in March it made a profit before tax and exceptional items of £2.6 million ($4.8 million) in the year ended Jan. 28, 2006, down from £6.9 million ($12.9 million) the year before.

HMV currently runs 195 Waterstone's stores. The books chain made a pretax profit of £200,000 ($376,000) in the six months to Oct. 29, 2005 down from £10.5 million ($19.7 million) in the same period the year before.