The music and books retailer said it had received a preliminary approach, without naming names, and said a further announcement would be made in due course. Permira and Merrill Lynch declined to comment.

By 0930 GMT (1500 IST), HMV shares had risen 18 per cent to 193 pence. Media reports said Permira's bid would value the group at around 800 million pounds ($1.4 billion).

The Daily Telegraph said U.S. private equity giants KKR and Blackstone have also considered bids.

Some analysts were surprised that a deal may be on the cards, given HMV's struggle against music downloading and a slowdown in the DVD market. Shares in HMV tumbled earlier this month on news of falling sales during the key Christmas period.

''Our initial reaction is one of scepticism that a deal could be completed at these levels,'' Numis analyst Steve Davies said.

''We have talked on numerous occasions about the competitive pressures which HMV is facing right now and which are only going to get worse over time.

''From a private equity viewpoint, the biggest hurdle is who they are going to sell the business to in two or three years time in order to generate their required returns.'' HMV is planning to buy UK bookseller Ottakar's. Britain's Competition Commission said last week it would report provisional findings into HMV's planned purchase by the end of March.

The regulator also said it would reach a final decision by May 22.