LEADING Debenhams’ shareholders are ex-pressing dismay at the pay package the department store’s chief executive Belinda Earl and finance director Matthew Roberts would receive if venture capitalgroup Permira succeeds with its bid.<\/p>\n
The shareholders are unhappy that if a bid by Permira, or from any other bidder is successful, Earl and Roberts stand to make millions by cashing in shares and options. Shareholders say the packages disincentivise the management team to keep the company independent and reward them for selling out. Earl stands to make more than Pounds 3m (E4.26m, $4.77m) from cashing in shares and options, while Roberts could get nearly Pounds 2m.<\/p>\n
Permira, which first announced its intention to bid for Debenhams in early May, is expected to make a formal offer of 425p-a-share this week, valuing the group at Pounds 1.54bn. The bid is likely to come after the company’s trading statement on Tuesday which will update the stock market on sales for the 20 weeks to 19 July.<\/p>\n
Earl and Roberts are working with Permira on the bid and will stay in their roles if the company is taken private.<\/p>\n
News of Permira’s initial approach in early May generated controversy as Earl had insisted just a few weeks earlier that the company was not in any bid talks.<\/p>\n
Rival venture capital groups CVC Capital and Texas Pacific Group have also teamed up and are preparing a joint rival bid for Debenhams but they are not expected to make a formal offer until Permira shows its hand. CVC Capital and TPG have asked John Lovering, who has recently tried unsuccessfully to buy Somerfield, to come on board as a non-executive director.<\/p>\n
Some shareholders are now questioning why Earl and Roberts appear keen to co-operate with potential bidders. Analysts point out that Debenhams has continued to deliver strong sales growth while its rivals have foundered.<\/p>\n
One leading Debenhams shareholder said: “It’s an extraordinary situation. The management are being asked to work with two sets of buyers, and when one of them offers a much better deal personally, it must be hard to make an unbiased decision. And that’s before they even begin to think about which options, if any, are in the shareholders’ best interest.”<\/p>\n
Investors also complain that the bids and the uncertainty surrounding timing has created confusion and instability within the group. They have the support of some senior executives at Debenhams who are worried that the venture capitalists will cut jobs to reduce costs and pay back the debt on a highly leveraged buyout.<\/p>\n
One industry source said: “There is no compelling reason for this deal. Debenhams is a good business and has been well-respected by the City. There is no overwhelming need to take it private in the way there was with smaller retailers like Allders.”<\/p>\n
There had also been some concern about a potential conflict of interest for chairman Peter Jarvis, who heads the board of independent directors that will consider the bids. He is eligible for a Pounds 220,000 pay- out if the group is bought and his role disappears.<\/p>\n
Shareholders have since said they are happy for him to continue as chairman of the bid committee.<\/p>\n","protected":false},"excerpt":{"rendered":"
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