WHSmith to expand in US with $400m deal for Marshall Retail


WHSmith plans to double its international travel business and strengthen its presence in the lucrative US airport shopping market with a deal to buy Marshall Retail Group.

WHSmith, a UK high street stalwart known for its stationery and books, said on Thursday that it had agreed to buy the Las Vegas-based company for $400m as it seeks to accelerate the growth in its travel operations and sidestep the worst of a slowdown in British town centres.

The deal would “broadly double” the size of WHSmith’s international travel business, the group said. It is buying MRG from Brentwood Associates, a private equity firm that acquired it in 2014 for an undisclosed price and is now looking to return capital to its investors.

“We have tracked this business for many years but they have only become willing to sell this year,” said Carl Cowling, who will take over from Stephen Clarke as WHSmith’s chief executive on November 1.

The proposed acquisition will be financed through a combination of new debt and equity, with about £155m to be raised through an underwritten equity placing, the group said. A new £200m term loan facility and an expansion of WHSmith’s existing revolving credit facility from £140m to £200m will also contribute.

Completion is expected in the first quarter of next year and will require shareholder approval.

Shares in WHSmith, established in 1792 as a family-run newsagent, rose almost 8 per cent in London trading on Thursday to their highest level since January 2018 and are close to an all-time high.

Jonathan Pritchard, an analyst at Peel Hunt, said the acquisition was “completely transformative” and showed that WHSmith intended to become a global player in travel retail.

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However, Tony Shiret, an analyst at Whitman Howard, noted that announcing such a substantial transaction at a time of management change increased the group’s risk profile.

Both Mr Clarke and his successor downplayed that risk, noting that MRG’s chief executive had been in place for two decades and would be “highly incentivised” to remain with the business. “We would still have been announcing this deal today even if I had not resigned,” said Mr Clarke. “We have met with all of our big shareholders this week and none of them were concerned about that.”

WHSmith’s travel business accounts for about two-thirds of operating profit. A year ago the group paid £155m for InMotion, a US retailer of technology products, in a deal aimed at strengthening its position in the country. The US retailer said InMotion had won its first tenders for US airport stores and that it had performed ahead of initial expectations.

MRG, which operates a variety of brands, has 170 stores in North America, with 59 of them inside airports. It plans to open another 33 stores over the next five years. Most of its revenue comes from the sale of news, gifts and convenience products. Sales from retail outlets in US airports are worth $3bn, according to WHSmith.

News of the acquisition was disclosed alongside WHSmith’s annual results. Pre-tax profit was flat at £135m in the year to the end of August, including £20m of exceptional costs.



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