VIRGIN boss Sir Richard Branson is poised to sever a link with his business roots by selling Megastores, the music retail chain where he started.

Branson’s Virgin group is understood to be in talks to sell the chain to its management, led by managing director Simon Douglas and finance director Steve Peckham. Although the talks are progressing well, it is not certain that a deal will be concluded, City sources said.

Douglas and Peckham are understood to have secured at least partial backing from E.UK, the music-distribution business owned by Woolworths.

If a sale goes ahead, the stores will be rebranded, with Branson retaining rights to the Virgin name. There will be a side deal that will give other Virgin-branded businesses, including Virgin Mobile and Virgin Media, outlets in the shops. There is also likely to be a loan deal that will see Branson repaid some of the millions of pounds he has pumped into the business if its performance improves.

It is not clear what price the management team will pay. In recent years Virgin Megastores has made heavy losses. Like other high-street music retailers, it has been squeezed by competition from internet retailers, music download services, and cheap music on sale at supermarkets. Only two national chains, Virgin and HMV, remain. One source said that recent investments had led to Virgin Megastores roughly breaking even.

A sale would signal a historic shift for Branson. He founded Virgin as a mail-order record business in 1970, and opened his first shop on Oxford Street in central London a year later. In 1979, the business bought the large store on the same street that became the first Virgin Megastore, and is still the flagship of the business.

There are now 130 Virgin Megastore shops, not all of which are owned by Virgin.

Virgin recently held talks with HMV about a potential joint venture, but they broke down over price.

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