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The battle for Ottakar’s

12 September 2005

At the time of writing the battle for Ottakar’s still rages. It all started with the bookselling chain producing worse-than-expected trading figures for the year to date, exacerbated by Ottakar’s getting a smaller slice of the Harry Potter 6 cake than had been anticipated. Irked no doubt by the wringing of hands in the city, James Heneage, founder and MD of Ottakar’s, and two other directors decided to take the firm back into private ownership with a management buyout. Ottakar’s has expanded successfully over the years and has always been respected in the trade for its focus on branch autonomy and a clear and successful strategy of building a family market for its shops, many of them in British market towns rather than cities.

So far, so good, and in spite of the recent dip in sales growth Heneage and Co had no difficulty in getting venture capital backing. The buyout team even recruited the well-regarded David Roche, Waterstone’s Product Director, as chief executive, with a brief to sort out the systems side which was thought to be holding Ottakar’s back in its growth plans. The MBO team even went back and upped their offer to shareholders to make sure that the bid would be fully supported.

Enter the big bad wolf, in the form of major competitor Waterstone’s, with an offer of 440p ($8.09), pitched 40p ($.735) higher than the MBO offer. Although any other parties have until 20 September to bid, this looks difficult for the MBO team to improve on. One might expect some interest from American giant Borders, which has been building very successfully in the UK, but they may be unwilling to invest this kind of money, in spite of the rapid growth in their international division.

Since Waterstone’s and Ottakar’s are the two biggest bookshop chains in the UK, the deal might be challenged by the Monopolies Commission. This looks unlikely though, because in spite of the great power this acquisition would give Waterstone’s, the two companies together would represent only 23.6% of the market and the monopoly figure is 25%.

If the Waterstone’s bid does scoop up Ottakar’s, many will feel regretful about this further concentration of book retailing power. The Ottakar’s chain is much liked by book buyers and publishers. Its focus on branch-level decisions and serving a local market has been quite different from the increasing centralisation of Waterstone’s. There is a real difference in culture, which has pitched Ottakar’s closer to the independents, whilst Waterstone’s has definitely become imbued with big company culture. Sadly though, it seems there’s little to stop the onward march of the big battalions, as the giants of the book trade become bigger and bigger. Book publishing and selling are big business now and their inevitable focus on bestsellers will continue to dominate the scene.