Hamleys former boss moves in on WH Smith

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The Independent Online

WH Smith yesterday revealed it had received a 375p-per-share bid approach from Permira, the private equity group that narrowly missed out on acquiring Debenhams.

WH Smith yesterday revealed it had received a 375p-per-share bid approach from Permira, the private equity group that narrowly missed out on acquiring Debenhams.

Simon Burke, the former Hamleys chief executive, and Keith Hammill, the chairman of Moss Bros, have been lined up to run the troubled high street retailer if Permira proceeds with its £900m offer.

WH Smith's board, headed by its chairman Richard Handover, is to meet tomorrow to consider its response ahead of the group's interim results announcement on Thursday, which is expected to confirm a 30 per cent collapse in profits. The company, which is seeking clarification of Permira's proposal, met a team from the private equity group last week, including Martin Clarke, who led its £700m takeover of New Look.

WH Smith confirmed receiving a "preliminary approach" from Permira for the entire group, including its Hodder publishing arm and its news distribution business. It warned: "As the approach is preliminary and there are a number of pre-conditions to the making of any offer, there can be no certainty that an offer for the company will be made." Permira yesterday declined to comment.

Shares in WH Smith, which climbed 8p to 260p on Friday, are expected to soar sharply this morning. They have fallen by more than 28 per cent over the past six months, valuing the group at £630m. Paul Smiddy, the retail analyst at Baird, yesterday described Permira's approach as "an amazingly generous opening shot".

Permira, which will today write to WH Smith to provide further details of its offer, would only proceed with a bid if it gains access to the retailer's books and obtains a recommendation from its board.

In an attempt to win over any militant shareholders unhappy at the dwindling number of quoted retailers, the private equity house is prepared to offer investors the chance to retain a stake if it proceeds with a takeover. It is thought Permira would consider allowing shareholders to own up to 20 per cent of the delisted company. New Look, Debenhams, Hamleys, Selfridges, Harvey Nichols and Arcadia have all been taken private in the past two years.

Messrs Burke and Hammill both know WH Smith well: Mr Burke used to run its then subsidiary, Virgin Our Price, while Mr Hammill, who mounted an abortive bid for the group's news distribution arm three years ago, was its finance director in the 1990s.

Permira is thought to have lined up the French media conglomerate Lagardère to buy Hodder should it proceed with its bid.

A successful offer would bring the curtain down on Kate Swann's short reign as chief executive, with Mr Burke, who turned round the Hamleys toy shop group before selling it to Iceland's Bauger last summer, expected to take her place. Mr Hammill would take a non-executive role, possibly that of chairman. Ms Swann, who used to run GUS's Argos catalogue shopping chain, would receive a £475,000 payoff, plus shares worth more than £500,000 if made redundant. Staff at the group's Swindon head office are braced for Ms Swann to announce up to 300 job cuts when she updates the City on Thursday about how she intends to rescue the struggling "legacy" retailer. Analysts have questioned WH Smith's role in today's crowded retail scene, arguing no one would seek to invent the company's mix of business if it did not already exist.

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