WH Smith slumps on bid fears

PRIVATE equity firm Cinven is getting cold feet about bidding for retail chain WH Smith, which has a huge pension liability. Smith fell 5p to 323p as hopes of a bidding war dissipated.

Rival bidder Permira is still pressing ahead with its £940m takeover plans, but is considering a cut in its 375p per share proposal because of the pension deficit.

City sources say Cinven is not keen and is likely to walk away altogether.

Permira and Cinven have been studying Smith's books to assess how much the business is worth. It is likely to be at least a fortnight-before Permira finalises its offer.

Smith had a £199m pension deficit in August 2003, but trustees say the liability is now between £200m and £250m.

Permira is likely to try to shave £100m off its original offer, but this may not wash with Smith's chief executive Kate Swann who believes she can revitalise the retail chain on her own.

A bidder could raise cash by selling off Smith's Hodder publishing arm or news distribution business.