An activist investment firm has started to build a stake in WHSmith after it sold off its high street arm to Modella Capital.

Palliser Capital has taken out a 5% stake in the retailer over the past few weeks, reported to be worth around £65m at the current share price, according to Sky News.

The firm is said to hold the WHSmith executive team in high regard, but believes shareholders’ returns can be boosted by self-help measures.

Palliser Capital founder and chief investment officer James Smith said: “Following the sale of its legacy high street business, we believe WH Smith will benefit from being a high-quality, pure-play travel retail operator.

“However, while its travel business has grown strongly in recent years, and recovered fully post-pandemic, its share price is still around Covid-19 levels and has consistently underperformed the broader travel and leisure and retail sectors.”

WHSmith travel stores span 1,200 units in over 30 countries. Palliser is understood to have identified WHSmith’s growth potential in the US as particularly attractive, with scope for shares to nearly double in value in the next three years.

The retailer sold its nearly 500 high street store estate to Modella Capital recently, with the stores to be rebranded as TGJones.

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