Shares in UK newspaper and book seller WH Smith shot up 35 per cent yesterday following news at the weekend of a private equity bid approach at a 44 per cent premium to Friday's closing price.
Permira, which has teamed up with two former WH Smith directors to make the move, indicated a bid price of 375p sterling a share. This values the company, which also has a publishing and news distribution arm, at £940 million (€1.41 billion).
The retailer's sales are under pressure from supermarket rivals, online retailers and music and book specialists and it has issued a string of profit warnings.
A takeover would see it follow in the footsteps of retailers Debenhams, New Look, Selfridges, Harvey Nichols, Bhs and Arcadia, which are all now in private hands.
Permira was outbid for Debenhams but, in the past, has owned and sold DIY chain Homebase.
WH Smith stressed the approach was preliminary, without any certainty that the proposal will be made formal.
"It's just an idea at this stage. We'll see how it goes," said a source connected to the bid group.
WH Smith's board will discuss its response at a meeting today.Permira, which will not launch a hostile deal, plans to give more details following WH Smith's results on Thursday.
Long-suffering shareholders, facing the prospect of a dividend cut, are awaiting a strategic update from new chief executive Ms Kate Swann at the half-year results this week.
The largest stockholder, with about 15 per cent of the shares, is Silchester International Investors, which declined to comment.
"If the offer is put to shareholders, we are sure that they will bite their arms off," said Mr Nick Bubb, yesterday Evolution Beeson Gregory.
Permira said its partners are Irish-born accountant Mr Simon Burke, former Hamley's toy shop chief executive, and Mr Keith Hammill, chairman of clothes chain Moss Bros.
Mr Burke was on the WH Smith board when he ran its Virgin Our Price music business. He plans to become chief executive. Mr Hammill is a former finance director of WH Smith who left when he was passed over in favour of Mr Richard Handover for the chief executive job. He would become chairman, replacing Mr Handover.
There will be an equity alternative in the bid plan, allowing shareholders to retain a stake in a separately listed company owning a minority of the shares.
