Permira told to 'put up or shut up' over its bid for WH Smith

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The Independent Online

Permira was yesterday put on notice to come back with a revised offer for WH Smith by 9 August or walk away from bidding for six months.

Permira was yesterday put on notice to come back with a revised offer for WH Smith by 9 August or walk away from bidding for six months.

WH Smith broke off takeover talks with Permira over a 371p offer last month, after Permira became concerned about a deficit in the company's pension fund that needed a cash injection. The Takeover Panel yesterday issued the "put up or shut up" order to the private equity house, demanding that it come forward with a bid by 9 August or withdraw.

A source said yesterday that Permira was intent on returning to the board within the next couple of weeks with a revised offer. Permira is understood to have been talking to a number of banks, as well as to the WH Smith's pension trustees, on how to find funding for a takeover deal that secures the pension scheme and also provides value to shareholders.

The pension fund is thought to require a £150m lifeline, which Permira is trying to factor in its revised bid. A bill of £150m is equivalent to taking 60p off the value of every WH Smith share, bringing Permira's initial bid down to 311p. A revised offer for WH Smith is likely to start from this base.

"What shareholders have to bear in mind is that the pension fund needs cash, regardless of whether or not there is a takeover," an insider said yesterday. WH Smith is planning to sell its Hodder Headline publishing business, but most of the proceeds would go towards safeguarding the pension fund.

Keith Hammill and Simon Burke, former WH Smith executives, have so far spearheaded the bid team. But John Lovering, the retail entrepreneur who has made bid attempts for Debenhams and Somerfield, is understood to have joined the team as deputy chairman.

WH Smith is understood to be relieved by the Takeover Panel's intervention. Shares yesterday closed down 0.5 per cent at 317.5p, giving the company a market capitalisation of £795.4m.

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