A sudden, but perhaps unsurprising, bit of e-book M&A today in the UK: the music and entertainment company HMV is selling its 64 percent stake in e-book retailer Anobii to the supermarket chain Sainsbury’s, for the princely sum of £1 ($1.55).
The deal will give Sainsbury’s a jump start into the e-book market as part of its stated strategy of becoming a bigger player in the digital media business. It has been gradually building this up since 2010, although without much fanfare: in November of that year it launched its Sainsbury’s Entertainment brand; in October 2011 it bought online entertainment company Global Media Vault; and earlier this year it started its own music downloading service. It also gives Sainsbury’s a window for international expansion: Anobii currently has 600,000 customers — not just in the UK but internationally.
The acquisition is a clear move on the part of Sainsbury’s to compete more directly with its big UK supermarket rival Tesco, which has its own e-books portal and resells e-reading devices like the Kindle from Amazon. Tesco’s has a modest number of titles in its catalog at the moment — 221,504 books, compared to the 60,000 in the Anobii catalog.
From the looks of it, for now Anobii’s other publisher shareholders are remaining on board. They include HarperCollins, Penguin and Random House UK. The four will continue to invest in the company to develop its services overseas.
Sainsbury’s is making much of Anobii’s strength not just in e-book retailing for multiple devices but also its social and engagement aspects. ”Anobii’s innovative use of social media is a clear differentiator. This acquisition is a valuable addition to our digital portfolio and shows our commitment to becoming a key player in the digital entertainment market,” said Mark Bennett, Sainsbury’s Head of Digital Entertainment, in a statement.
Still, this is not exactly unique in online book retailing, considering that Amazon and others also offer reader reviews and ratings to help with the sometimes tricky process of discovery on e-book websites.
As both Tesco and Sainsbury’s continue to shift more of their business online — the UK supermarket industry has a thriving online shopping/ home delivery service, something pioneered by Tesco — they are additionally looking for more products to shift through that infrastructure, and for ways of more comprehensively competing against companies like Amazon, which continue to encroach on their territory.
On HMV’s side, the company, built primarily on the troubled music market, has been in a tight situation for some time now and has needed to shed assets and fast — as evidenced by the very low price tag on the Anobii sale.
But that also points to the challenges that Sainsbury’s and existing shareholders will continue to face to make headway in an industry that is dominated by Amazon, with several other big retailers like Waterstones in the UK (also once part of HMV, until HMV sold the chain to Russian Alexander Mamut in 2011) linking up with the U.S. giant to make the playing field even less level.
Update: HMV is not commenting on the deal, and nor is GP Bullhound, the tech investment bank that acted as financial advisor to HMV on the sale.
But the numbers look like they stack up to an exercise in cutting losses. HMV had paid $3.25 million for its Anobii stake last year and, combined with its stake in 7Digital music streaming service, the pair made a loss of £1 million ($1.5 million) last year, according to paidContent. That number may well have been on track to be even bigger this year.
It looks like the Sainsbury’s deal also represents a significant (undisclosed) investment in Anobii: the company’s stake is now 64 percent, compared to the 45.4 percent that HMV originally owned in the e-book company.
Anobii is an international social network for books with a large user base in over 20 countries. It was founded in Hong Kong by Greg Sung in 2006 to fulfil peoples passion for sharing books with other readers. A new company backed by Hmv, HarperCollins, Random House and Penguin Group acquired Anobii in September 2010. In June 2012, Sainsbury’s supermarkets acquired HMV’s stake in Anobii.
GP Bullhound is a leading investment banking firm providing advice on mergers & acquisitions and institutional capital-raising to emerging growth companies in the Technology sector. The firm was established in 1999, and has completed over 100 M&A and Private Placement transactions on behalf of Europe’s leading entrepreneurs and business builders. Driven by some of the most experienced technology advisory professionals, GP Bullhoundâ€™s long track record and dedicated approach has helped us establish a leading global position. GP Bullhound has strong...