WH Smith backs out of asset sale

Nigel Cope,City Editor
Tuesday 11 March 2014 02:11
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WH Smith abandoned the sale of its news distribution business yesterday after the buyer tried to lower the price. ABN Amro Private Equity had agreed in July to pay £215m for the division, WH Smith News – the UK's largest wholesaler of newspapers and magazines.

But WH Smith pulled out after ABN tried to lower the price below £200m. Richard Handover, WH Smith's chief executive, said: "Our view was that the revised figure ABN Amro came up with ... was simply nowhere near what we think the real value of the business is."

Mr Handover said the "For Sale" sign for the division has been taken down for now, but he admitted the business was non-core and that if anyone came up with a "serious, uncomplicated offer" he would be duty bound to put it to the board.

ABN Amro was backing WH Smith's former finance director, Keith Hamill, and its former news distribution managing director, Terry Reilly, in the deal. Mr Handover said he did not believe his former directors had been "trying to pull a fast one" with a last-minute cut in its offer price.

Smith's had planned to use the proceeds to invest in the business and return up to £100m to shareholders.

Profits from the news distribution business had fallen from £18m to £6m in the first half of the year. But yesterday Smith said trading in had been "strong" and the outlook "encouraging".

The break down of the sale is the second blow in a week to WH Smith, which issued a profits warning last week. WH Smith's said its US travel business, which has stores in hotels and airports, had suffered a "material adverse" impact since the terrorist attacks on the US on 11 September.

The failure to sell WH Smith News has a positive impact on analysts' earnings forecasts as they had already factored in the sale. The shares rose 12.75p to 431p. They stood at 564.6p at the end of July.

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