BOOKshop chain Ottakar's agreed to a takeover by HMV yesterday after conceding it faced a losing battle against supermarkets and online retailers.

The deal for Ottakar's is worth nearly £63m - significantly less than the £96.4m offered by Waterstone's owner HMV last year.

Doubts have been raised about what the merger will mean to towns and cities such as Darlington and Harrogate, in North Yorkshire, that have Ottakar's and Waterstone's shops in close proximity.

Ottakar's chairman Philip Dunne said the book market had undergone significant change in the past year, with new levels of competition from supermarkets and web retailers affecting all specialist booksellers.

He said: "Against this background and, given the costs and risks associated with implementing the necessary restructuring programme to compete longer term, the board of Ottakar's believes that the offer is fair and reasonable."

Mr Dunne said the recommendation was in the absence of a higher offer being tabled by another party.

No other groups have so far expressed an interest in buying Ottakar's, although WH Smith is seen in the City as a potential bidder.

The first offer from HMV caused a storm in the literary community and was referred to the Competition Commission for an investigation.

The subsequent inquiry found in HMV's favour because of the presence of supermarkets and online operators, such as Amazon. HMV chief executive Alan Giles said Ottakar's store portfolio was highly complementary to that of Waterstone's.

He said: "A combined Waterstone's and Ottakar's business will create an exciting, quality bookseller, able to respond better to the increasingly competitive pressures of the retail market."

In Darlington, Waterstone's opened a store in High Row, opposite the Ottakar's shop in the Cornmill Centre. In Harrogate, both booksellers have sites in James Street, in the city centre.

While HMV did not give details of its plans for Ottakar's, Christian Koefoed-Nielsen of stockbroker Panmure Gordon, believes the tie-up is likely to lead to branch closures where overlaps between the two estates occur.