Tim Waterstone, the book retailing entrepreneur, has secured venture capital backing from Prudential Portfolio Managers in a bid to win back the high street chain that still bears his name.

PPM is understood to have approached the advisers to HMV Media Group, the music retailer which at present owns Waterstone's, in the hope of opening negotiations. The chain has been valued at between £250m and £300m.

HMV Media is saddled with debt and under pressure to rid itself of Waterstone's before it can proceed with its planned float. The book retailing business has been suffering from increased competition and saw a 34% drop in profits last year to £37.2m at a time when book sales were booming.

HMV Media employed two investment banks earlier this year to review its options for Waterstone's and held discussions with at least two prospective buyers during the early summer.

Bertelsmann, the German media concern, and Borders, the US book store group which recently arrived on British shores, both made bids.

Bertelsmann owns online book retailing business BOL, while Borders owns the Books, etc chain and own-branded outlets for books and music.

Mr Waterstone had previously made an informal approach and had been temporarily suspended from the board of HMV Media - where he is chairman - in order to pursue a bid.

If Mr Waterstone buys back the chain it will be an extraordinary twist in the history of the company.

Since he founded the chain in 1982, the business has been sold to WH Smith and subsequently merged with Dillons and the HMV music chain.

Mr Waterstone is known to be unhappy with the way in which HMV Media has managed the bookshop business, and has accused the executive of dumbing down the chain.

He opened his first shop in the Old Brompton Road in west London and sold the then 20-strong chain of loss-making shops to WH Smith for £42m, making himself £10m in the process. Mr Waterstone also founded children's retailer Daisy & Tom.

Waterstone's, which includes the rebranded Dillons, has expanded to 300 outlets.

HMV Media is owned by music group EMI and Advent, the American venture capital firm.