THE owner of the Waterstone's chain of bookshops confirmed yesterday that it was in takeover talks with rival Ottakar's.

Music, book and DVD retailer HMV Group said it was in the early stages of discussing a bid that could scupper the plans of the founder of Ottakar's and other senior executives to take the company private.

Ottakar's emerged as a takeover target less than a fortnight ago when the company revealed that it was in discussions about a possible management buyout.

Yesterday's statement from HMV, based in Maidenhead, sparked hopes of a bidding war among investors and sent shares in Ottakar's up more than five per cent, valuing the company at £79.2m.

The interest comes despite tough conditions facing the book market as supermarkets undercut established high street chains with discount deals on best-sellers.