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'A big deal in the public imagination'

1 May 2006

Just as we were feeling that we have heard enough about Waterstone's bid for Ottakar's and the referral to the Competition Commission comes the latest extraordinary twist in this saga.

HMV, the owners of Waterstone's, made a bid for Ottakars last year, after the smaller chain tried to arrange a management buyout to take it back into private ownership. At a time when competition in the sector had reached a zenith, with all UK booksellers feeling squeezed between the supermarkets and the Internet, many in the book world felt that to have one big book chain dominating the market would only make things worse.

The Competition Commission thought otherwise, but in the meantime HMV itself has received a bid from private equity firm Permira, and, whilst it is reconsidering its own bid for Ottakars, there has been some speculation that W H Smith, the slumbering giant of the British book market, has got far enough in its own turnaround to be interested in competing for Ottakar's itself.

Into these somewhat muddied waters has stepped Tim Waterstone, the original founder of Waterstone's, whose continuing desire to buy back the bookshop chain which bears his name has not always been taken all that seriously in the City. This time however Waterstone means business, and he's tabled an offer of £280 million to prove it. Two interesting differences give this bid a chance of success. The first is that it is conditional on Waterstone's not acquiring Ottakars, on the ground that buying the smaller chain would be a distraction from setting Waterstone's own house in order.

The second is that Tim Waterstone has teamed up with the much respected Anthony Forbes Watson, former CEO of Penguin Group UK, who would take on the role of Waterstone's CEO. It's unusual for a publisher to become a bookseller, but Forbes Watson would certainly bring an interesting perspective to the role, as well as a heartening faith in the book market. He said:

'Our offer reflects our optimism about books. Despite a fraught market, book sales are going up each year by 5%... Books are still a big deal in the public imagination. They are an astonishing product and Waterstone's has to be able to tap into that... We would make the most of the emotional dimension of books rather than the commodity dimension.'

This seems like a view that writers could endorse wholeheartedly.