Permira gets green light from WH Smith

Contrary to market speculation, WH Smith has agreed to allow Permira to conduct confirmatory due diligence following its £940m approach for the UK retailer earlier this week.

Despite speculation to the contrary, chief executive Karen Swann yesterday confirmed that WH Smith has agreed to allow London-based private equity firm Permira to conduct initial due diligence on the troubled UK retailer.

Announcing the company’s disappointing six-month figures to 29 February with underlying profits down by 28 percent, Swann said that the board was taking Permira’s approach seriously.

Swann described WH Smith’s performance as “unacceptable” and outlined her own plans for the group including job cuts and did not rule out a disposal of its publishing business, Hodder Headline.

Permira submitted a £940 million (€1.4 billion; $1.7 billion) bid earlier this week for the business. Swann declined to comment on whether an auction process with other potential bidders was likely.

Permira, which is investing the €5.1 billion Permira Europe III fund which closed in July 2003, has pitched its offer at 375 pence per share, representing a 44 percent premium to the target company's 260 pence share price at close of trading last Friday.

Permira’s track record in the retail sector includes the recent acquisition of a 30 percent stake in fashion retailer New Look for £100 million in March, investing alongside Apax Partners. It also used to own DIY chain Homebase, which was sold to Great Universal Stores for £900 million in November 2002 to complete what was one of the firm's most successful investments ever.