Permira drops £940m offer for WH Smith

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The Independent Online

Permira Walked away from a £940m takeover of WH Smith yesterday after failing to find a way to plug the retailer's pension fund shortfall.

Permira Walked away from a £940m takeover of WH Smith yesterday after failing to find a way to plug the retailer's pension fund shortfall.

Problems with WH Smith's pension fund emerged last month when trustees of the scheme told Permira they wanted a substantial cash injection to help alleviate a £190m deficit in the fund.

Permira, whose bid team was led by two former WH Smith executives, Simon Burke and Keith Hammill, suspended talks on its 371p-a-share offer after the pension deficit emerged. Since then, it has been locked in negotiations with the trustees to solve the pension funding issue and make a revised offer. An upfront injection of about £150m was needed, which is equivalent to 60p a share. Any revised offer would have been substantially lower than 371p to take this into account.

A statement from Jamaica, the name of Permira's bid vehicle, said: "Jamaica has now reluctantly decided that it will not be possible to reach an arrangement with the trustees that would enable Jamaica to make an offer on terms which would be acceptable to shareholders." The trustees were also concerned that WH Smith would be loaded with too much debt after the takeover, and wanted the pension fund to have an equal call on the company's assets as its banks.

WH Smith plans to sell off its Hodder Headline publishing business, the proceeds of which will go towards its pension deficit. It said it had had "a number of expressions of interest" for the business. Kate Swann, the chief executive of WH Smith, said: "We can now focus fully on our turnaround plans for the high street business and deliver value for our shareholders."

Investors were not convinced, however. Richard Ratner, at Seymour Pierce, said: "Not only have we failed to get rid of the company, which in the past has continually disappointed, but even if WH Smith sells Hodder Headline at up to £240m, it is likely to donate a chunk of the proceeds to the pension fund."

WH Smith shares closed down nearly 8 per cent at 290p.

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