WHSmith plans to split business

WHSmith plans to split business

	Published : Wed, 12 Apr 2006 16:45 By : Paula Demarzio Print this Story

LONDON: High street books and stationery retailer WHSmith Plc. is separating its retail and news distribution businesses as it faced a tough trading situation with like-for-like sales dropping 3 per cent to 1.3 billion pounds for the six months ended 28 February.

The retailer, however, said pre-tax profits rose 4 per cent during the period. Sales were up 6 per cent at its high street stores to 57 million pounds and sales at its shops in airports and railway stations up 18 per cent to 13 million pounds.

The company's chief executive Kate Swann said the decision to split the two main units -- WHSmith Retail and WHSmith News -- will help these businesses to "benefit from increased focus and to pursue their strategies to maximum effect".

According to company sources, the separation would be formalised through a demerger of the retail business and creating two listed companies.

The company had been thinking of spinning off the news distribution unit since 2001 and it had a client in ABN Amro Private Equity, which had offered 215 million pounds. The deal fell through after ABN Amro reduced its offer.

Swann said the decision is subject to approval by the shareholders. She said the demerger proposal is not intended to attract buyers for WHSmith News. However, if there are suitable offers, these would be considered.

She said no timetable has been set for the demerger. "It’s a complex issue separating the two businesses, with a number of things that we need to work through," she added.

There is speculation that the entire group is up for sale. In fact, in 2004, venture capital firm Permira had shown interest and had proposed 940 million pounds as price, but it withdrew looking at the company's 190-million-pound pension deficit. This deficit has now come down by more than half.

VC firms Electra and 3i were also interested in the firm.

Shares of the company were up 28.5 pence or 7 per cent, at 436 pence, valuing the business at 789 million pounds. The distribution division has been valued at around 400 million pounds.