Struggling WH Smith exits Australasia with £47m sale

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WH Smith, the struggling retailer facing a £940m takeover bid, all but ended its overseas foray yesterday with the £47m sale of its businesses in Australia and New Zealand.

WH Smith, the struggling retailer facing a £940m takeover bid, all but ended its overseas foray yesterday with the £47m sale of its businesses in Australia and New Zealand.

The disposal, to Prudential's Australian arm Pacific Equity Partners, leaves Smith's with just one shop in Singapore's Changi airport, which was excluded from the sale. It comes months after the group admitted defeat in the US, booking a £39m charge on the sale of its loss-making travel and hotel stores operations.

Smith's failure overseas notches up a further black mark against Richard Handover, who stepped up to become chairman when Kate Swann succeeded him as chief executive five months ago. Buying its "Aspac" retail arm - which trades as Angus and Robertson in Australia and Whitcoulls and Bennets in New Zealand - for £34m was Mr Handover's first overseas move at the helm of the group that reported interim losses of £72m on Thursday.

Analysts hailed yesterday's deal, which will give Smith's a rare exceptional gain in the second half of its financial year. Its Asia-Pacific businesses, which included 28 Smith's-branded stores in Hong Kong, New Zealand and Australia, had net assets of £28m at 31 August 2003. "This represents a better outcome than the market had expected," David Geary, at CSFB, said.

The disposal will enable Ms Swann to concentrate on turning round the group's core UK retail estate, which notched up another dire performance during the past six months. Like-for-like sales at its high street stores have deteriorated during the past seven weeks, falling 1 per cent, although its gross margin is thought to have edged ahead. "Unacceptable" operating profits at the division nearly halved to £51m, prompting Ms Swann to contemplate cutting back its ranges further to concentrate on building a "compelling" offer in its core categories of stationery, books and magazines.

Smith's declined to comment on its plans for the proceeds but did not rule out handing them back to shareholders. Although the group has given Permira, which last week made a 375p-per-share approach, the green light to conduct due diligence, some analysts believe Smith's should beat the private equity house at its own game by stockpiling cash to return to investors by selling off assets.

The group could sell both its news distribution arm, worth an estimated £220m, and its Hodder Headline publishing business, for about £230m, leaving it with just its retail estate. Ms Swann has admitted there are "no sacred cows". Lagadere, the French media group, is reported to be interested in buying Hodder.

A Smith's spokeswoman said the group hoped to sell its remaining overseas interest in Singapore soon. Shares in Smith's climbed 2p to 359.5p.

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