Tim Waterstone's attempt to buy back the Waterstone's book chain appeared to have collapsed yesterday as HMV Media flatly rejected his £180m bid.

The entrepreneur, who founded Britain's best known book retailer in 1982, was unable to agree with HMV on the value of the business and on the way its mounting debts would be settled.

In a statement, he said he was disappointed, adding: "It is probably best to allow a pause so that Waterstone's can concentrate on resolving its very pressing managerial and financial problems."

Some sources suggested that the deal was not necessarily dead.

Mr Waterstone has financial backing from PPM Ventures, the venture capital arm of the Prudential insurance empire. PPM set a deadline of Monday evening to be given exclusivity in negotiations.

HMV refused to offer exclusivity, because it was hoping for a higher offer. Competing interest came from the US retailer Borders, though its bid was closer to £100m.

HMV is under pressure to sell from its leading shareholders, including music group EMI, which owns a 43% stake. The book chain has turned in a disappointing performance since HMV bought it for £300m from WH Smith in 1998.

Mr Waterstone, a director of HMV Media until two weeks ago, has been critical of the management of the book chain. He believes it should stock a wider range with less emphasis on bestsellers. He has the sympathy of leading figures in the literary community. Author Will Self last year attacked the chain's gradual "cultural impoverishment".

Waterstone's attracted unwelcome publicity last year by sacking Robert Topping, manager of the Deansgate branch in Manchester, for stocking too many obscure books.

Mr Waterstone insisted that his offer was "the best price that could have been expected".