HMV’s £46m bid for live music specialist Mama moved a step closer to conclusion this week when SMS Finance, the investment vehicle run by telecoms billionaire Silvio Scaglia, pulled out of the race.

SMS made an unsolicited £38m bid for Mama last month that has now lapsed, having received no support. HMV, which tabled its bid before Christmas, has received the full backing of Mama’s board.

If its offer is successful, HMV will gain full control of live music venues including the HMV Apollo and Jazz Café, as well as the annual Lovebox music festival.

The deal forms part of HMV chief executive Simon Fox’s diversification strategy to combat music downloading and competition from supermarkets, instituted three years ago. Last January, the entertainment retailer launched a joint venture with Mama to run the 11 music and entertainment venues around the country, which also include the Forum in north London and The Picture House in Edinburgh.

Mama revealed a pre-tax profit of £4.8m for the year to July 31 - a rise of £49,000 on the previous year. HMV’s bid is still subject to approval by Mama’s shareholders.