WH Smith refuses to pay Permira inducement fee for takeover bid

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The board of WH Smith has refused to pay Permira, the private equity group that made a £940m takeover approach for the troubled retailer, any form of inducement fee.

The board of WH Smith has refused to pay Permira, the private equity group that made a £940m takeover approach for the troubled retailer, any form of inducement fee.

The company granted Permira access to its data room yesterday, after weeks of wrangling over whether to pay the venture capitalists to conduct due diligence.

Permira had wanted Smith's to agree to pay it a £9.4m break fee - 1 per cent of the value of any bid - in the event that it decides not to recommend the offer to its shareholders.

A spokesman for Permira said yesterday: "We have reached an amicable agreement that we are very happy with." He declined to comment on whether Smith's would cover any of its costs, adding: "We have signed a confidentiality agreement."

Should another bidder emerge and succeed in getting Smith's to cover its bid costs, it is understood that Permira would be entitled to receive the same amount.

Analysts said that Smith's decision not to pay any form of inducement fees suggested there was no longer a queue of potential suitors for the group, which also owns the Hodder Headline publishing business and has a newspaper distribution unit.

"It's as if no one else can make the numbers add up," one analyst said. Blackstone, the US private equity group that had been running a slide rule over Smith's, is thought to have given up.

If Permira opts to walk away, Smith's shares will drop by more than £1 to the near five-year low they were trading at before the private equity group made its 375p-per-share approach. It shares fell 5.5p to 345p yesterday.

Permira is expected to spend up to six weeks looking at Smith's books before deciding whether to make a firm offer for the group. A room in Linklaters, the City law firm that advises Smith's, has been made available for Permira's bankers to analyse the group's data.

The private equity group has teamed up with Simon Burke - the former boss of Hamleys' who was passed over for the Smith's chief executive's role in favour of Kate Swann - and Keith Hamill, the former finance director of Smith's.

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