WH Smith in £223m sell-off

STRUGGLING retail group WH Smith unveiled the £223m sale of its publishing business Hodder Headline today. The operation is to be sold to French-owned Hachette Livre in a deal that will allow WH Smith to return £207m in cash to shareholders, some 85p per share.

WH Smith is selling the publishing business for £210m in cash and a £13m pension fund liability. Hodder Headline generated substantial profits last year, some £19m on sales of £144m, and had net assets of £256m on ce the pension deficit was taken into account.

WH Smith‘s chief executive, Kate Swann, today described the sale as a key part of the group‘s strategy to narrow the breadth of its operations. She added: ?The sale of Hodder Headline is an important milestone in our strategy to simplify the structure of the Group and to focus on our core retail and news distribution businesses.‘

The sale of Hodder represents swift work by Swann. The company announced its revamped investor strategy only last week in the wake of the failed bid for WH Smith by venture capital outfit Permira.

The firm pulled out of its planned acquisition citing concerns over the size of the company‘s pension fund. Last week WH Smith said it would inject £120m into the pension fund, more than halving the existing deficit.

The company received numerous expressions of interest in the publishing business and Hodder is believed to have been one of several buyers to hold talks with WH Smith management.

Hodder Headline is one of the UK's largest book publishers. It has positions in both consumer and educational publishing and has operations in the UK, Australia and New Zealand, employing some 833 people worldwide.

The £120m one-off payment into the pension scheme will be made once Hodder Headline is divested, and a new £120m borrowing facility has been arranged to cover the move. It will halve Smith's annual payments into the fund from £42m to around £21m.

Swann said last week that WH Smith‘s current trading is in line with expectations and cost savings of £30m have been targeted by the financial year ending August 2007.