WHSmith has made the decision to sell its UK high street business to a private equity firm in a £76m deal as it focuses on becoming a pureplay global travel retailer.
Modella Capital, which owns Hobbycraft and The Original Factory Shop, has purchased the high street business, with all stores, colleagues, assets and liabilities moving under Modella’s ownership.
The high street division currently employs around 5,000 colleagues across around 480 stores.
The business will now be led by WHSmith’s current chief executive of the high street, Sean Toal, and will operate under the WHSmith brand for a short transactional period.
The WHSmith brand and name is not included in the sale, as the business will soon rebrand to TGJones.
In a statement to the London Stock Exchange, WHSmith said the consideration represents an enterprise value of £76m on a cash and debt-free basis, with gross cash proceeds of £52m. Net cash proceeds are expected to be around £25m after transaction and separation costs.
The transaction is set to be complete in the final quarter of the group’s current financial year, with anticipated gross cash proceeds of £36m when completed, along with a further £6m 12 months following that, and up to £10m in additional proceeds based on “timing and realisation of certain tax assets” within the high street business.
The sale excludes online greeting card business funkypigeon.com. The group will explore strategic options for this, including a possible sale.
Taking flight
The group is now focused on its travel division, which made up 75% of the group’s revenue and 85% of its trading profit in its recent results.
The high street arm has increasingly become a smaller part of the wider group in recent years, but WHSmith emphasises that it is still “profitable and cash generative”.
The group’s travel strategy now consists of increasing spend per passenger, optimal use of space, growing space in new and existing markets, and growing passenger numbers.
It adds it is in a “strong position” to rollout its one-stop-shop strategy as “landlords look to combine travel retail concepts”.
WHSmith group chief executive Carl Cowling said: “As we continue to deliver on our strategic ambition to become the leading global travel retailer, this is a pivotal moment for WHSmith as we become a business exclusively focused on travel.
“We have a highly successful travel business, operating in fast-growing markets in 32 countries and we are constantly innovating to deliver strong returns and meet our customers’ and partners’ needs. Our travel business currently accounts for around 75% of the Group’s revenue and 85% of its trading profit.
“With the ongoing strength in our UK travel division, and the scale of the growth opportunities in both North America and the rest of the world, we are in our strongest-ever position to deliver enhanced growth as we move forward as a pureplay travel retailer.
“As our travel business has grown, our UK High Street business has become a much smaller part of the WHSmith Group. High Street is a good business; it is profitable and cash-generative with an experienced and high-performing management team.
“However, given our rapid international growth, now is the right time for a new owner to take the High Street business forward and for the WHSmith leadership team to focus exclusively on our travel business. I wish the high street team every success.
“As we look forward as a simplified, travel-focused group, I am excited about the group’s future prospects. With a clear strategy, a strong balance sheet, and operations in high-growth and attractive markets, we are well-positioned to generate substantial growth and value for all stakeholders.”
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