Troubled bargain bookseller The Works is on the verge of being sold to a private equity house for just £15 million.

The bargain-basement price is in stark contrast to the£50 million valuation of The Works just three years ago, when it was sold to Hermes Private Equity.

Leeds-based investor Endless has emerged as the front-runner to acquire The Works, which went into administration in January and has 210 stores. Administrator Kroll has closed about 85 stores already, resulting in around 450 job losses

The deal will surprise many in the industry, because discount booksellers on the high street face fierce competition from the grocers, big specialists and online giant Amazon.
Endless is in discussions with The Works to finalise the transaction, which could be completed in the next few days.

Endless is an emerging private equity house, which has secured£299 million in two rounds of funding since it was established in December 2005.

Over the past two years, it has completed 19 acquisitions, six full exits and two partial exits, investing£110 million in businesses including now-defunct DIY retailer Glyn Webb.

However, industry experts feel that Endless faces an uphill battle if it plans to resuscitate The Works as a discount bookseller.

Planet Retail analyst Greg Hodge said: “I do not think the [discount bookseller model] can exist on the high street because of competition from the grocers and online.”

Retail Knowledge Bank senior partner Robert Clark said: “Discount booksellers have struggled for many years.” He pointed out that one way booksellers on the high street can prosper is by tailoring their offer to a niche local market, but The Works has not delivered this formula so far.

Hodge said that Endless could have its eye on a quick exit. “They could probably recuperate a certain amount of money by just selling off the stores in a few years’ time,” he said.

The Works delivered a pre-tax profit of£3.4 million on total sales of£96.4 million for the year to April 29, 2006.

The Works, Kroll and Endless were unavailable for comment.