The entrepreneur has handed the business, which launched his career almost 40 years ago, to its management

By Dearbail Jordan

Sir Richard Branson has ended his 37-year-old association with record retailing after agreeing to sell Virgin Megastores to a management buyout team.

The 125 UK and Irish stores will now be rebranded as "zavvi" after the management team which acquired the chain, although the brand names Virgin Mobile and Virgin Media will continue to trade from in-store concessions. The stores will be rebranded over the next six weeks.

The deal, for an undisclosed sum, was led by Virgin Megastores' managing director, Simon Douglas and finance director Steve Peckham.

The sale is an 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.

The Sunday Times reported yesterday that the Virgin boss was set to sever a link with his business roots by selling the music retail chain where he started.

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

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.

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 told The Sunday Times said that recent investments had led to Virgin Megastores roughly breaking even.

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