Waterstone to set proposals before WH Smith today

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The Independent Online
WH Smith will finally meet Tim Waterstone today to discuss his audacious restructuring plans for the high street struggler.

But as Nigel Cope, City Correspondent, reports, his revised set of proposals may still receive a frosty reception.

Both sides declined to comment on the planned meeting yesterday but it is understood Jeremy Hardie, WH Smith's chairman, and Richard Handover, its new chief executive, will meet Mr Waterstone today in an attempt to assess if his proposals have any merit for shareholders.

Ian Martin, the Unigate chairman who is being proposed by Mr Waterstone as deputy chairman of the revised group, will also attend.

News of the planned meeting met with mixed reaction from analysts. "At the end of the day, I think it's going to be pretty difficult for Tim Waterstone to get what he wants without making a formal bid," said Nick Bubb, retail analyst at Societe Generale Strauss Turnbull.

He added: "The big problem [Mr Waterstone] has is ... that a lot of the ideas can simply be pinched by Smiths."

If Smith rejects the revised proposals, some analysts said Mr Waterstone might decide to launch a bid for the group.

The decision to get together represents a major climbdown for Smiths, which rejected Mr Waterstone's original proposals outright. The change of heart follows a week-long series of meetings between Mr Waterstone and key WH Smith institutional investors who are unhappy at both the company's woeful share price performance and, some say, the cavalier approach of the Smith board.

Mr Waterstone will present a revised set of proposals to Mr Hardie and Mr Handover at the meeting. Instead of the original 200p per share payout, which would have been funded by almost pounds 600m of new debt, Mr Waterstone will propose a distribution of between 125p and 150p. Shareholders will also receive shares in a new company with around pounds 400m of debt.

The new proposals, under which Mr Waterstone would install himself as chief executive, also see a far lower valuation attached to Daisy & Tom, Mr Waterstone's children's operation which has a single shop on London's Kings Road.

Instead of the original pounds 35m valuation, the deal will suggest a pounds 9m valuation, the sum invested by Mr Waterstone and backers. Additional payments would be made on an earn-out basis.