HMV is now the favourite to win the bidding battle

HMV launched a 440p-per-share bid for Ottakar's bookstores last week, which valued the firm at £96.4m ($177m).

The offer trumped an existing bid by the chain's management of £4-a-share, which had initially been backed by Ottakar's independent directors.

Ottakar's was founded in 1987 and today has 137 stores across the UK.

Bidding war

Ottakar's said it was continuing to hold talks with other parties interested in buying the firm, but that no other offers had yet been made.

The retailer has been the subject of an increasingly frenetic bidding war over the past two weeks.

The independent directors consider the terms of the offer to be fair and reasonable Ottakar's statement See Ottakar's share price

Directors headed by managing director James Heneage initially made a 350p-per-share offer to buy the firm around the same time that Ottakar's confirmed it had been approached by HMV.

The management, who are being backed by private equity firm Phoenix Equity Partners, subsequently raised their offer to £4-a-share.

Ottakar's independent directors initially recommended the management's takeover offer but have now withdrawn that recommendation in favour of HMV.

"The independent directors confirm that they consider the terms of the offer to be fair and reasonable and will be unanimously recommending that Ottakar's shareholders accept the offer," they said in a statement.

HMV already owns the Waterstone's book chain.

If HMV's bid is successful, the merged bookstore chain would control 23% of the market, which could raise competition concerns.