The Board of Debenhams was still locked in talks with Permira last night over the £1.54bn bid from the private-equity group amid suggestions that the company was no longer certain about recommending the offer.
Debenhams will issue a statement this morning which is expected to say that discussions are still continuing. It is thought that the independent directors who are examining the bid feel nervous about recommending an offer at 425p a share, when the current share price is 427p.
The board has also been angered by Permira's insistence that a "material adverse change" clause be included in the bid terms. This could allow Permira to walk away if there is a significant change in Debenhams' fortunes or those of the retail sector. But the Debenhams directors feel that Permira has spent sufficient time on its due diligence to be sure of Debenhams' health. The venture-capital group also has access to management information as its bid camp includes the department store retailer's chief executive, Belinda Earl, and its finance director, Matthew Roberts.
The chances of the board recommending the bid are now considered no greater than 50-50, having looked virtually certain on Friday evening. Permira's stance has also hardened.
Any wavering could let in the rival bid camp led by CVC Partners and Texas Pacific Group, though it has yet to compete due diligence.
It has emerged that Debenhams is paying the CVC-Texas Pacific camp up to £6m to continue with its bid. This is payable at the rate of £1m a week over six weeks as long as they can show they are still working on the transaction. Debenhams says it is not happy about the payments but has agreed in order to increase the chances of an auction for the company.
Permira also stands to receive £6m if the board does not recommend its offer. If Permira's bid is trumped, this rises to £8.5m. Such payments are allowed under the Takeover Code which states that inducement fees of up to 0.5 per cent of the offer value can be paid.
Institutional investors in Debenhams have expressed little appetite for an offer of 425p a share following an upbeat trading statement from the company last week.
But the risk for Debenhams shareholders is that talks could break down and both bidders could then walk away, forcing the share price sharply lower.
The bids are being scrutinised by Debenhams independent directors led by its chairman, Peter Jarvis, and the board's senior independent non-executive director, Tim Clarke.
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