Panel sets Debenhams deadline as Earl admits uncertain future

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The Independent Online

Belinda Earl, the chief executive of Debenhams, yesterday admitted for the first time that she might not have a future in the business if CVC Capital and Texas Pacific beat off competition from Permira to acquire the department store group.

"Our roles are rather less clear in respect to the future," Ms Earl said, referring to the recommended £1.66bn offer from the private equity duo, heightening speculation that the current management team will be replaced unless Permira wins out.

The admission came as Debenhams upped the ante for its suitors yesterday, revealing a buoyant start to its current year as it posted strong full-year numbers. Institutional investors said they would be looking for Permira, the private equity group that started courting Debenhams in July, to improve on a rival recommended 455p-per-share offer from CVC Capital and Texas Pacific.

The Takeover Panel last night gave Permira a 16-day ultimatum to raise its initial 425p-per-share offer. If Laragrove, Permira's bidding consortium, has failed to lodge a higher bid with the Panel by 4pm on 31 October then it will be barred from the bid battle.

Debenhams' shares climbed 0.5p to 472.5p yesterday in anticipation of a higher bid. "You would expect a successful offer to be higher than the market," one top 10 shareholder said, adding that something in the region of 480p-per-share looked more reasonable.

In an attempt to bring a speedy end to a drawn out process, the City takeover watchdog set an accelerated bid timetable that could see the department store group wind up in new hands by Christmas. If required, the Panel plans to conduct a four-day open auction that will culminate in sudden death for the losing party via sealed bids on 4 November.

Debenhams revealed yesterday that it had clocked up £13.6m of bid costs to pay its army of City advisers. It has paid out £1.9m to its 10-strong team of advisers so far and has accrued a further £11.7m in costs. Although the company has agreed to pay a £8.5m break-fee to the disappointed bidder, it escaped paying a £6m inducement fee to CVC/Texas Pacific after Baroness Retail, the venture capitalists' bidding consortium, launched its offer.

The department store chain said like-for-like sales in the six weeks to 11 October had outstripped those at rivals Marks & Spencer and Next, rising by 2.7 per cent. This was less than the 3.7 per cent underlying sales growth reported for the year to 30 August, but reflected the recent unseasonably warm weather.

Analysts were divided about how high bidders may go in light of yesterday's trading update. "The pressure is on the private equity firms to pay up," one retail analyst said. However, another said: "At the current levels, you are starting to look at numbers, which become quite tricky for venture capitalists in terms of cash-flow yields." Some analysts have suggested the group could fetch as much as 490p per share.

Ms Earl, who controversially helped Permira conduct due diligence on the group over the summer, said she had kept staff up to date about the bid battle via a series of face-to-face briefings, conference calls, letters and updates to the company's internal internet. She described the management team, which also worked with CVC and Texas Pacific on its bid, as a "spectator" in the bid process, which is being run by an independent committee of directors.

Debenhams reported full year pre-tax profits of £151m, down from £153.6m. However, these included £17.4m of exceptional costs.

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