WH Smith sells its distribution arm to ABN
WH Smith sells its distribution arm to ABN
By Andrea Felsted
Published: July 5 2001 17:32GMT | Last Updated: July 5 2001 17:40GMT
WH Smith has agreed to sell its distribution division to ABN Amro Private
Equity, in a £215m ($303m) cash deal that trumped a rival offer from JP
Morgan Partners.
The sale is subject to the successful transfer of distribution contracts and
due diligence .
As well as the JP Morgan private-equity business, previously regarded as the
frontrunner, ABN Amro outbid other private-equity firms including Electra
and 3i, which had put in offers at earlier stages.
The sale includes the distribution division and Connect2U, a web-based
communication and customer service platform, which links UK retailers,
wholesalers, manufacturers and publishers.
It comes despite a threat from Daily Mail & General Trust, the media group,
to terminate its distribution contract with WH Smith.
WH Smith said the division was in talks with its large customers and
suppliers on transferring contracts to the new owner.
It said its biggest contract, a magazine distribution deal with Frontline,
which represents magazine publishers including Emap, BBC Magazines and
Haymarket, was renegotiated in February to include a clause that would allow
it to be automatically transferred to a new owner.
However, it said some of the other contracts, for example some newspaper
distribution contracts, were not automatically transferable.
“These talks [that are under way] are about transferring these contracts. We
are confident that these agreements will be met,” it said.
WH Smith said it was pleased with the price achieved. However, it compares
with initial estimates that put the value of the division at up to £300m. WH
Smith formally announced in April that its distribution arm was up for sale.
Disposal of the business, which has a book value of just £20m, will underpin
its plans to increase investment in its retail businesses and make
acquisitions in publishing.
Last month it bought Blue Star, one of the largest book retail chains in
Australia and New Zealand for £38m. The division recorded profits of £12m,
in the six months to February 28, on turnover of about £1bn. However,
profits have been hit by a slowdown in demand from the magazine sector and
investment costs.
The distribution division is the UK’s largest wholesaler of newspapers and
magazines, with 33 per cent and 36 per cent market shares respectively.
The shares closed 1p higher at 541p. The sale must be approved by WH Smith
shareholders.
