Permira offers £940m for WH Smith

London-based private equity firm Permira has submitted a £940 million offer for WH Smith, the UK high street retailer.

WH Smith, the troubled UK retailer, has received a £940 million (€1.4 billion; $1.7 billion) public-to-private takeover bid from private equity firm Permira.

Permira, which is investing the £5.1 billion fund it closed last year has pitched its offer at 375 pence per share, representing a 44 percent premium to the target company’s 259.75 pence share price at the close of trading last Friday.

The Financial Times reports that Richard Handover and John Warren, the chairman and finance director respectively of WH Smith, met representatives of Permira last week, when the private equity house indicated that it wished to reach an agreed deal. The WH Smith board is meeting tomorrow to discuss the approach. 

Permira is reported to be working with a management team that includes two former WH Smith executives: Simon Burke, the former chief executive of London toy store Hamleys, and Keith Hammill, the chairman of menswear chain Moss Bros.

Permira has a good track record in the UK retail sector. Its most recent fundraising was strongly assisted by a swift and profitable exit from DIY chain Homebase, which was sold to Great Universal Stores for £900 million in November 2002. Last month it invested £100 million for a 30 percent stake in New Look, following the fashion chain’s £700 million public-to-private takeover that was also supported by Apax Partners.

Poor trading performance at some of the UK’s largest retail chains has led private equity firms to scrutinise opportunities in the sector. The Business reports that clothing and food retailer Marks and Spencer may be back on the sales block after it disappointed investors last week with news of falling sales. US private equity firm Kohlberg Kravis Roberts has been identified as a possible bidder.