WH Smith distribution arm sold to ABN Amro

WH Smith is to sell its news distribution business to ABN Amro Private Equity for £215m. ABN has backed Keith Hammil, the former Smith's finance director, and Terry Reilly, the group's former operations director, in the deal. Mr Hammil will become non-executive chairman, with Mr Reilly as chief executive.

As a result, the managing director of WH Smith News, Lloyd Wigglesworth, will leave the company after the deal's completion. He will be in line for compensation of £235,000, equivalent to a year's salary. He also has share options worth £149,000.

WH Smith News made profits of £38m last year on sales of £1bn. But half-year profits announced in April fell by a third to £12m because of a weak magazine market and the cost of Smith's failed plan last year to set up a national magazine distribution system. Smith's shares closed a penny higher at 541p.

Analysts, broadly positive, still cautioned that the deal would dilute earnings by about 10 per cent. "The issue now is what will WH Smith do with the money," one said. "Will they hand shareholders the cash or make an acquisition?"

The City has feared that Smith's will use the proceeds to fund a major publishing deal in the United States.