WH Smith dithers over rescue plan

Pressure is growing among institutional shareholders for the board of WH Smith to meet with Tim Waterstone and his advisers to discuss his controversial plans to re-invigorate the ailing retailer.

A groundswell of City opinion wants the WH Smith board to provide an evaluation of the waterstone offer. A shareholder said: "Could we not explore how the offer might work?"

The pressure comes following the emergence of Mr Waterstone's masterplan, which conflicts with the version reported by the board of Smith's when it rejected his overtures last week.

A spokesman for WH Smith said the board had no further comment to make about the offer. However, he conceded that, "in the hypothetical event of shareholders asking us to meet Mr Waterstone, we would listen to the shareholders."

WH Smith accused Mr Waterstone and his advisers of trying to enrich themselves at the expense of shareholders. Sources close to Mr Waterstone deny the charge. Among the objections raised by WH Smith was the prospect that a golden circle would get free warrants equal to five per cent of the share capital in the new company.

Chief executive, Richard Handover, who only took up the post on Wednesday, criticised the warrants for "giving away shareholders' rights". The terms of the warrants, however, show they set tough thresholds before they can be cashed in. They would be exercised in four equal tranches, dependent on gains of 20 per cent, 40 per cent, 60 per cent and 80 per cent in the shares of the new company. Ownership of the warrants would be spread between Mr Waterstone, SBC Warburg and, although this has not so far been revealed, the incumbent management.

Under Mr Waterstone's vision for reinvigorating WH Smith, chief executive Richard Handover would stay on as chief operating officer. Mr Handover took the top job following the departure of Bill Cockburn to BT.

Ian Martin, chairman of Unigate, would be appointed to the board as deputy chairman under the current chairman, Jeremy Handley, but in the expectation he would soon rise to be chairman after Mr Handley retires.

Sources close to Mr Waterstone's plans shot down claims that debt would total pounds 1bn. Of the pounds 1bn facility provided by SBC Warburg, pounds 600m would be used to fund the down-payment of a 200p a share offer to existing shareholders.

The remaining pounds 400m would be used as working capital, replacing WH Smith's pounds 350m of debt, and would appear only gradually on the balance sheet.

While that would entail gearing of between 100 per cent and 200 per cent, interest cover would be 3.7 times after earnings before interest, tax and depreciation.

Criticism from WH Smith of the level of fees to be earned by SBC Warburg is also refuted by Mr Waterstone's team. A figure of pounds 34m mentioned by WH Smith, it is said, failed to point out that of this, pounds 20m was a standard banking fee on the debt facility.

Corporate advisory fees would amount to 2.6 per cent of the value of the deal. This would amount to more than pounds 5m, but less than pounds 10m, or at least pounds 4m below WH Smith's figure.

Mr Waterstone was criticised by Mr Handover for his wish to inject his new retail concept, the Daisy and Tom kids chain, into the group. One source asked that if WH Smith was so critical, "why can't they generate higher returns in one of the wealthiest shopping areas in Britain?"

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate