Stock rises as HMV looks to strengthen books arm.

Market-leading British music retailer HMV Group plc has signalled plans to bolster its activities in the bookselling business. HMV said today (Aug. 25) it was in preliminary discussions with Ottakar's plc over a possible purchase of the U.K. book-store chain.

HMV already owns the rival Waterstone's bookseller chain, which is on target to open its 200th store during the current financial year.

"HMV Group confirms that it is in preliminary discussions with the committee of Ottakar's independent directors which may or may not lead to an offer being made for the Company," HMV said in a statement issued to the London Stock Exchange. Stock in HMV rose 5% to 357p during morning trading.

The offer under discussion would be through a new company to be formed by private equity investors and some of Ottakar's directors, HMV added.

Revenues at Waterstone's rose 2.6% to £440 million ($796.4 million) in HMV's 2004/2005 financial year, with operating profit up 0.4% to £26.1 million ($47.2 million).

In the year to January 2004, Ottakar's posted £6.9 million ($12.4 million) operating profit on revenue of £153.7 million ($276 million). The company was founded in 1987 by its current managing director James Heneage and chairman Philip Dunne. It currently has more than 130 branches.