From Menzies to Mega: the background to the deal

Hammicks' fourth change of ownership in 16 years will see its bookshops back in UK hands, but mean the disappearance of a name that has been on English high streets for 35 years.

Founded by Charles Hammick in 1968, the south-east-based business--then comprising 21 stores and a wholesale division--was sold to John Menzies for £6m in 1987. The bookshops were passed on five years later for £6.8m to a management team led by former Hatchards m.d. Vincent Campbell, with the wholesale arm retained by Menzies to form THE.

Hammicks m.d. Trevor Goul-Wheeker replaced the original buy-in team at the helm in 1994, when the chain was verging on bankruptcy. His revitalisation of the business over the next four years helped it to grow sales and more than halve losses. It was sold to South African entertainment group MEGA for an undisclosed sum in 1998.

MEGA's backing saw Hammicks sustain its recovery over subsequent years, during which it reviewed and rejigged its property portfolio. The parent company later became part of the South African holding group Johnnic. Hammicks Bookshops, including the legal bookselling business, reported pretax profit of £470,000 on sales of £41.9m in the year to end-March 2002.

But Johnnic was not committed to investment. "Johnnic was revisiting its assets and this UK book chain, with low market share at 3%, was not at the heart of its strategic direction," Mr Goul-Wheeker said. "The choice was either to invest substantially in order to grow, or exit."

While Johnnic had not been prepared to invest in new sites, Hammicks had raised capital in the UK to fund the expansion. But it could not compete with fashion retailers and others for two-floor high street sites. "It was difficult to do property deals of the kind we needed at the right price."

Mr Goul-Wheeker admitted the chain had "obviously not succeeded" in Birkenhead, which it opened in 2001 and closed earlier this year. But the closure was a "reality check" for Hammicks. "Last year's market was so tough we decided to batten down rather than go for expansion."

A deal with Ottakar's had "always been a possibility", although talks had begun in earnest at the beginning of the year.

Hammicks' turnround has brought the chain closer in profile to Ottakar's--local focus, careful choice of location and a strengthening of the lifestyle format stores were designed to complement rather than to challenge Ottakar's. The geographical fit is excellent; only Woking currently supports branches of both chains.