Waterstones owner Alexander Mamut is in talks to sell the business to Elliott Advisors, the hedge fund that floated Game Digital four years ago.
Elliott is in exclusive talks to snap up the bookseller, according to Sky News, although the deal being discussed is understood to be worth less than Mamut’s initial £250m asking price.
His decision to put the retailer on the market came following a crisis at Otkritie, the Russian bank in which he is a major shareholder.
Prospective new owner Elliott Advisors is part of a bigger investment management empire and remains a shareholder in Game.
Waterstones is turning a corner under boss James Daunt as it capitalises on a resurgence in physical book sales.
In its latest financial results, covering the year to April 30, 2016, the business swung to a pre-tax profit of £9.8m. It now trades from around 275 shops across the UK.
Rothschild, which is running the sale process, was unavailable for comment.