Investors criticise Debenhams board over bidding fees

Institutional investors in Debenhams yesterday criticised the board of the department store retailer for agreeing to pay substantial fees to the two potential bidders for the company.

Debenhams, which has yet to recommend a £1.54bn offer from Permira, the venture capital group, has agreed to pay Permira £6m if it does not back its offer and a break fee of £8.5 if Permira's bid is trumped by another party. Debenhams has also agreed to pay £5m towards the costs of rival bid group CVC Capital and Texas Pacific Group which is still conducting due diligence.

One leading shareholder said yesterday: "These fees are starting to add up. The Permira offer of 425p per share doesn't look very generous and maybe the board is trying too hard to get an auction going. But this is serious money."

Debenhams issued a statement yesterday saying the independent directors were still discussing the bid terms with Permira. "There can be no certainty that an offer will be put forward for shareholders to consider," it said. The statement added that discussions were continuing with CVC and Texas Pacific but these were still at an early stage. The shares fell 4p to 423p.

Debenhams' independent directors are still considered likely to back the Permira bid, possibly as early as today, after four days of wrangling. "The view is that the majority of shareholders would like to see the bid," a Debenhams spokesperson said.

It is understood the final negotiations are about what kind of "wriggle room" Permira might have if the board recommends its offer. But Debenhams directors feel that after more than two months of due diligence and the help of the chief executive and finance director, it should have satisfied itself about the health of the business by now.

Fund managers say the shares could be worth at least 450p after last week's bullish trading statement. The bids are being examined by the independent directors as Belinda Earl, chief executive, and Matthew Roberts, finance director, are involved in both bid camps.