WH Smith suspends takeover talks
Retailer planning to spin off publishing arm
WH Smith has suspended talks with venture capitalist Permira over a sale of the business.
WH Smith issued a statement late on Tuesday saying that “Permira has advised the company that it is highly unlikely that it will make an offer for WHSmith at 371p per share.”
The two sides have been in talks since April, when WH Smith agreed to allow Permira access to its books to conduct due dilgence. However, the talks have stalled over an expectation that Permira would top up a shortfall in WH Smith’s pension fund as a condition of any deal.
Martin Taylor, the director who oversees the trustees of WH Smith’s pension fund, insisted Permira to speed up payments needed to ensure the company can meet its pension obligations.
WH Smith said that Permira had been told by Taylor that “a substantial cash contribution to the pension fund would be required in the context of an offer for the company financed by a significant level of borrowings with security over the company’s assets.
“In light of these developments, the company has suspended discussions with Permira pending clarification of the level of any possible offer for the company.”
That leaves the way open for Permira to return with a lower offer. The bid is fronted by Simon Burke, the former executive chairman of toy store Hamleys, and Keith Hammill, chairman of menswear retailer Moss Bros, both former directors of WH Smith.
At the same time, WH Smith has announced alternative plans to restructure the business, saying that in plans to sell or demerge its publishing business, Hodder Headline, before the end of the year.
The company said it is in discussions with a number of potential buyers. Cash from a sale of Hodder would be returned to shareholders, with a contribution also made to the pension trust.
Kate Swann, group chief executive, said: “Hodder Headline is a premier publisher which has performed well for the past five years under Tim Hely Hutchinson’s management. The board believes that a sale or demerger of Hodder Headline will not only realise value for WHSmith’s shareholders but will also allow Hodder Headline to fulfil its ambitions more effectively within the global publishing arena.
“With the exit from the USA, the sale of our ASPAC businesses and the demerger or sale of Hodder Headline, the group structure is being radically sharpened. These strategic actions enable a greater focus on our core retail and news businesses.”
