The majority of branches were rebranded as Waterstone's, while a remainder were sold on to the smaller chain Ottakar's, which itself was later taken over by Waterstone's in 2006.
HMV chief executive Alan Giles said in a statement: "A combined Waterstone's and Ottakar's business will create an exciting, quality bookseller, able to respond better to the increasingly competitive pressures of the retail market."