Outlook: Plan B for Smiths is not much better

Outlook on attitudes to monetary union, the WH SMith proposals and the new bid for mci

Tim Waterstone has returned with Plan B for his putative takeover of WH Smith. Under the proposals sketched out yesterday, the debt levels will be lower, there is a far more realistic valuation of his Daisy & Tom business, which now appears to be worth only a quarter of its value a fortnight ago, and the advisers fees will be lower. Mr Waterstone is also proposing to tinker with the boardroom structure so that instead of installing himself as chief executive over the head of Richard Handover, he would become deputy chairman with Mr Handover staying put

However, for all the rearranging of the deck chairs, Plan B is not a decisive improvement on his first stab at a leveraged takeover. Smiths shareholders are still being bribed with their own money and asked to put their faith in a much more highly geared vehicle.

Nor does it look likely that the incumbent management will settle down to a life of harmonious co-existence with the man who was trying to snatch their company from under them a few days ago

If Mr Waterstone's ideas of a capital repayment coupled with a break- up of the business are so attractive to shareholders, then why doesn't the existing management implement them and dispense with the fancy fees that SBC Warburg will ring up?

Smith's probably has a duty to put the Waterstone proposals to its annual meeting next Wednesday and let shareholders have their say.

Having missed his opportunity to strike when the ship was rudderless, the most galling thing for Mr Waterstone would be either to see the incumbent management copy his ideas or discover that he had spurred them into action. That, however, if often the fate of the interloper.

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