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Waterstone's founder may join bidding for WH Smith

Tim Waterstone, the entrepreneur who set up the chain of bookshops that bears his name, is believed to be considering a £1bn bid for WH Smith.

Mr Waterstone would look to trump an existing hostile 375p-a-share bid for the retailer that emerged a week ago from Permira, the private equity house.

It is thought that WH Smith is looking to attract interest from other bidders and insiders said that "plenty of people have been calling". The retailer believes the Permira approach is opportunistic and greatly undervalues the company, which has a presence on most high streets in the country.

Mr Waterstone, who has just led the acquisition of the Early Learning Centre chain for £62m, is a former WH Smith employee, so he knows the business well. He left to set up Waterstone's, which was later bought by WH Smith. The bookshop chain is now owned by HMV Group.

Mr Waterstone attempted to bid for WH Smith in the late 1990s. He would need private equity backing for his renewed interest, which could be pitched at between 400p and 410p a share, according to reports. There are several private equity houses, such as Cinven, looking to counter-bid against Permira that could link up with him. Mr Waterstone did not return calls yesterday.

Following confirmation of Permira's £940m approach last week, WH Smith unveiled a 29 per cent fall in underlying half-year profits and outlined a strategy to revive the fortunes of the group, which is struggling in the face of supermarket rivals.

The Permira bid is being spearheaded by the former Hamleys boss Simon Burke and the Moss Bros chairman Keith Hamill, a former finance director of WH Smith.