Hong Kong-based private-equity firm AID Partners is ready to partially exit HMV‘s Hong Kong and Singapore businesses, which it had acquired in 2013. It has agreed to sell 18.37 per cent stake in the business to Japan-based World Innovation Lab for $9 million.
As per the agreement, the Japanese investment firm will acquire 2,250 new ordinary shares in the capital of the HMV Group’s Asian operations.
According to a stock exchange filing, the proceeds from the stake sale would be used for the general working capital of the HMV Group. It also said World Innovation Lab specialised in investment in, among others, technology and media sectors, and its introduction as a partner would help in the strategic development and promotion of the businesses of the movie and music retailer by bringing in international network and business experience.
Under the agreement, AID Partners will sell shares in HMV’s Asia portfolio – which is operated under an entity of HMV Marketing – to WiL Fund I, an investment fund managed by World Innovation Lab. Upon completion of the deal, AID Partners will still own 81.63 per cent of the business.
The Japanese investor will also nominate a director to be appointed to the board of HMV, once the deal is completed.
In 2013, the AID Partners had bought HMV’s operations in Hong Kong and Singapore, along with all its licenses in mainland China, Macau and Taiwan for an undisclosed amount.
At the time, HMV had six stores in Hong Kong and two in Singapore, and an e-commerce business in Hong Kong. During its holding period, AID Partners has reduced the number of music and movie retail stores to five and opened two restaurants and a cafe under the HMV brand.
The Asian business is legally a separate entity from HMV in the UK, which went into administration one month before AID acquiring the Asian business.
As on 30 June 2015, the unaudited net liabilities of HMV Marketing were around HK$39,512,000.
HMV affiliates in Asia have earlier also been the target of private equity investment. In 2010, Daiwa SMBC Principal exited HMV Japan to local convenience store chain operator Lawson for around $22 million. Daiwa had acquired a 100 per cent stake in the operations in 2007 through a carve-out from the company’s UK parent.