Germany's Deutsche Post eyes WH Smith's news spin-off
THE newspaper distribution arm of WH Smith could face a takeover bid from Germany's Deutsche Post after the retailer's chief executive, Kate Swann, announced plans to demerge the business and float it on the stock market, though no timetable was given.
The business had a turnover of Pounds 531 million in the half-year to the end of February and made an Pounds 18 million operating profit.
THE newspaper distribution arm of WH Smith could face a takeover bid from Germany's Deutsche Post after the retailer's chief executive, Kate Swann, announced plans to demerge the business and float it on the stock market, though no timetable was given.
WH Smith considered selling its news distribution arm in 2001, when it came close to selling it to a private equity buyer.
Deutsche Post, Europe's largest postal service provider, considered a bid at that time and City analysts believe it could quickly renew its interest in the business.
Private equity firms have also been tipped as potential bidders for the news division. It is one of three newspaper distribution businesses nationally, along with Menzies and Dawson Holdings.
Neither of the other two firms is likely to bid for WH Smith's news business since any such move would almost certainly be thwarted by the competition authorities.
There is also a degree of uncertainty over the future of the sector as the Office of Fair Trading is reviewing the present system of newspaper and magazine distribution.
Last year, an OFT draft ruling said that the way magazines are distributed, through wholesalers with exclusive territories, breached competition law.
However, the OFT has since decided to review the sector again and is expected to report later in the year.
Separately, there has been speculation that WH Smith's decision to split the business could herald an expansion by the retail arm, including a possible bid for loss-making book chain Ottakar's, which is already facing an offer from the HMV group, which includes Waterstone's.
Shares in Ottakar's rose 143/ 4p to 3511/ 4p last week on hopes of a takeover race.
STOCKWATCH WH Smith up on talk Deutsche Post to bid for paper distribution ops
AFX International ProFeed 04-18-2006
LONDON (AFX) – Shares in WH Smith gained in morning deals amid talk the retailer's newspaper distribution arm is being eyed by Germany's Deutsche Post, dealers said.
The speculation comes after chief executive Kate Swann announced plans to demerge the business and float it on the stock market.
According to the Mail On Sunday, Deutsche Post considered bidding for the operations when WH Smith came close to selling the paper distribution to a private equity group in 2001.
And the paper claimed analysts believe it could quickly renew its interest in the business, adding private equity firms have also been tipped as potential bidders.
The business, which has been dogged by an Office of Fair Trading probe into the distribution of newspapers and magazines in the UK, had a turnover of 531 mln stg in the half-year to the end of February and made an 18 mln stg operating profit.
The Mail on Sunday also said there has been speculation that WH Smith's decision to split the business could herald an expansion by the retail arm, including a possible bid for loss-making book chain Ottakars, which is already facing an offer from HMV, which includes bookseller Waterstone's.
Sentiment was further boosted as ABN Amro raised its price target on WH Smith to 415 pence as it reiterated its 'hold' advice.
In a note to clients, the broker said the sceptical view is that the separation of the news distribution business is timed ahead of slowing trends within its markets which could disrupt group progress over the year ahead.
That will allow management to focus on Retail where it has visibility that cost savings can lead to the achievement of the Management Investment Plan targets almost irrespective of retail conditions, the broker added.
ABN believes the the key question remains how to initiate a genuine trading recovery on the High Street to carry the business once the current cost saving opportunities fully expire.
At 10.16 am, shares in WH Smith gained 7-3/4 pence at 433-1/4.
