Earl's Debenhams days numbered as Permira pulls out

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The Independent Online

Belinda Earl looked set to step down as chief executive of Debenhams after a £1.7bn knockout bid for the department store group yesterday forced a rival suitor to withdraw from the tussle for the retailer.

Baroness Retailer, a consortium of CVC Partners and Texas Pacific, is expected to replace Ms Earl and her co-executives with a new management team led by John Lovering, the retail entrepreneur behind Homebase. It confirmed yesterday that it had raised its offer from 455p per share to 470p, forcing Permira's Laragrove consortium to concede defeat.

Laragrove, whose prospects of victory crumbled after Goldman Sachs pulled out of the consortium, said £1.7bn was "in excess of the price [we were] prepared to offer". In an attempt to justify Ms Earl's decision to team up with Permira in May, Laragrove pointed out that Debenhams' shareholders would receive an extra £165m under Baroness' revised offer.

Ms Earl and Matthew Roberts, the company's finance director, will meet the Baroness team today or tomorrow to discuss their future, but sources close to the bidder said the duo were unlikely to remain at Debenhams. Ms Earl stands to pocket more than £3m from cashing in her shares and options, while Mr Roberts will bank some £2m. Both will also receive pay-offs in line with their contracts: £600,000 and £360,000 respectively.

Analysts said investors were likely to back the 470p-per-share bid, citing the deteriorating outlook for the high street if the Bank of England raises interest rates next month, despite initially believing the group could fetch around 490p per share. "Shareholders are getting a pretty fair deal at this level," Iain McDonald, at Numis Securities, said.

One top 10 shareholder said 470p still looked "a little lighter than a full price", adding: "It's not a foregone conclusion shareholders will accept." But shares in Debenhams slipped 0.75p to 466p, as the City bet against another bidder emerging before the group's decisive shareholder meeting on 10 November.

Despite the increased offer, which saw Baroness in effect bid against itself, investors remained critical of Ms Earl's decision to seek a buyer for the group. "Our preference would have been not to have had the bids," one shareholder said, adding that the management's eagerness to sell "must have inhibited bidders". He described Ms Earl's imminent departure as a "salutary lesson".

If the deal goes through Mr Lovering is expected to become non-executive chairman, while Rob Templeman, the former Homebase chief executive, and Chris Woodhouse, the do-it-yourself retailer's former commercial director, are tipped to become Debenhams' chief executive and finance director.

Neither has any experience running a clothes retailer. The three will share 8.8 per cent of the equity in the private company, while CVC and Texas Pacific will own 37.9 per cent apiece and Merrill Lynch Private Equity 15.4 per cent.