WH Smith shares were at a two-year low yesterday after takeover talks hit the rocks.

The troubled high street retailer, which employs about 1,300 people at its Greenbridge headquarters, has already announced plans to make 300 staff redundant this year.

It seemed the future was looking rosier when venture capital group Permira announced in April that it was interested in taking Smiths over.

But yesterday shares hit a two-month low after talks between Permira and WH Smith were suspended earlier in the week.

Permira has had access to WH Smith's books and staff as part of the due diligence process before any firm offer is made.

Earlier this month it was reported that a £190 million pension shortfall had proved a stumbling block to the takeover, because trustees of WH Smith's pensions fund wanted assurance that the gap would be filled in the event of the deal going through.

Now WH Smith has closed its books to Permira because it says the venture capitalists are dragging their heels.

WH Smith spokeswoman Louise Evans said: "Talks are suspended. The reason is that Permira has been negotiating with the trustees of the pension fund for a number of weeks and they have known about the issue surrounding the deficit, but still have not reached an agreement.

"We are helping them with the due diligence and giving access to people and information but they still can't resolve it.

"If they can't confirm the price, they need to sort out the issues. In the meantime we are closing the data room."

Permira declined to comment.

Permira was thought to be about to offer 371p a share about £940 million but that is now unlikely.

Shares were down to 293p yesterday, the worst showing since Permira first showed an interest news which saw the share price rally.

Analysts said yesterday that while the news was not good, hopes of a takeover had not entirely disappeared.

WH Smith is also planning to either sell or demerge its book publishing business. Hodder Headline is the fourth largest consumer book house in the UK, publishing Gazza, Jonny Wilkinson, Rosamund Pilcher and Stephen King. It is also the second largest publisher of secondary school textbooks in Britain. WH Smith said there have been several expressions of interest. It is thought large publishing houses are interested in growing the business.