MUSIC store HMV yesterday rejected the latest multi-million pound takeover offer from private equity firm Permira.

The retailer, which owns the Waterstone's book chain, as well as its music shops, said the £842.7m bid undervalued the company.

The 210p-a-share offer was tabled after HMV rejected an earlier offer of 190p a share.

In a statement to the stock market, HMV said: "The board unanimously believes that the revised proposal from Permira continues to undervalue the group.

"As such, HMV will not be entering into discussions with Permira with regard to the revised conditional proposal."

HMV said it was continuing to work on its strategy to revitalise the business and its effort to find a successor to chief executive Alan Giles.

It said the proposed acquisition of bookshop rival Ottakar's, which is being scrutinised by the Competition Commission, would be value-enhancing to shareholders.

The company said it would be able to compete against continuing competition from supermarkets and the Internet, which it blamed for a fall in sales over the Christmas period.

The decline was made worse by heavy discounting in an attempt to lure shoppers back to its stores, which in turn reduced profit margins.

Christmas sales were only helped by albums from Robbie Williams and Eminem.

Tim Waterstone, who founded the book chain but stood down as chairman in 2001, has also been linked to a possible £250m deal to buy Waterstone's back.