A British restructuring firm has agreed to pay $3.2 million for music retailer HMV Canada.

Hilco UK will also provide up to $25 million in funding to help its newly acquired chain of 121 locations across Canada continue its growth strategy, which consists in part of a much greater digital presence.

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Hilco's CEO Paul McGowan says the firm has the support of every major supplier in the industry for the restructuring.

A subsidiary of London-based HMV PLC, HMV has been a dominant seller of music and related items since it opened its first Canadian location in 1986.

The chain was once one of the largest music sellers in Canada, but in recent years sales have cratered in the face of digital music sales.

The company only launched an online music selling division in the summer of 2010. And the chain recently started upgrading its bricks-and-mortar locations with a new focus on accessories such as phones, game controllers and other electronics in the face of dwindling CD sales.

"The new product categories it is introducing to the business will help sustain sales levels during the transition of entertainment sales into the digital realm," McGowan said.

Revenue was $360 million last year, and the company closed five stores in the last 12 months. It currently has about 2,000 employees.

"They'll look at stores that are underperforming; that has to be a key part of the review," said John Stevenson, a retail analyst at Peel Hunt in London.

With files from The Canadian Press