Permira hatching fresh bid for WH Smith after pensions setback

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The Independent Online

Permira, the venture capital group, is plotting a fresh bid for WH Smith after being forced to abandon talks with the retailer.

Discussions were suspended last week after it emerged that Permira would have to pump millions into WHS's pension scheme for the bid to proceed. The fund has a £190m deficit, and demands by trustees that any bidder should meet the shortfall made Permira's £940m offer for the company untenable.

However, a well-placed source said Permira hadn't given up the pursuit of WHS. The venture capitalist, whose bid is fronted by former Hamleys chief Simon Burke and Moss Bros chairman Keith Hamill, is expected to make a revised offer in two to three weeks.

Permira's original bid was pitched at 371p a share. Investment bank Merrill Lynch believes the next approach could be at 330p to 340p. WHS shares closed at 313p on Friday.

But they could be heading for a fall. WHS chief executive, Kate Swann, announced last week that the company was looking to sell or float its publishing business, Hodder Headline, thought to be worth up to £230m. US publisher Simon & Schuster and French company Lagardère are tipped as possible buyers.

Ms Swann promised that the proceeds of a sale would be distributed to shareholders and a small amount would be used to help shore up the pension fund.

However, it is understood that the WHS pension trustees are demanding that over half of the proceeds should be injected into the fund. This could depress WHS's share price, as it would reduce the amount of cash returned to shareholders, probably through a special dividend,

It would therefore increase the chances of a successful bid from Permira as the pension fund liabilities would be significantly reduced.