Entertainment retailer HMV has announced that it will buy 14 Zavvi stores out of administration. The deal will be funded through a placing of some 20 million shares at 1p each. 

Entertainment retailer HMV has announced that it will buy 14 Zavvi stores out of administration. The deal will be funded through a placing of some 20 million shares at 1p each.

The placing represents up to five per cent of the music retailer’s issued share capital and the gross proceeds are estimated at around £25 million based on the placing price.

The proceeds of the placing and a recently secured bank facility will be used to bolster its stretched balance sheet.

Simon Fox, HMV CEO, said: “The proceeds [of the placing] will fund HMV’s entry into the fast-growing live music market and the acquisition of the Zavvi stores from the administrators and, together with our recently agreed £220 million bank facility to 2011, will provide for the maintenance of a strong and prudent balance sheet.”

Citigroup Global Markets UK Equity and Nomura International acted as joint brokers.