Sale of WH Smith News agreed

ABN AMRO Private Equity is set to buy the news distribution arm of WH Smith for £215m in cash. The acquisition, which includes Connect2U, its web based communication and customer service platform, is subject to three conditions: ABN AMRO finalising due diligence, contractual arrangements between parties, including customers and suppliers, and shareholder approval.

WH Smith hopes to sign the sale and purchase agreement within three weeks and convene an EGM in August.

WH Smith, which has a distribution network of 51 warehouses throughout England and Wales, has been looking to sell the division since April following its “attempted restructuring”. In 2000 the news distribution division had net profits of £38m, while this year the forecast is for just £27m. In the year to August 2000 WH Smith News generated sales of £1.047 billion.

Coinciding with the announcement is the news that the managing director of the news division Lloyd Wigglesworth is leaving the company with immediate effect. Andy Forrester, the finance director, will assume immediate responsibility.

A WH Smith spokesman confirmed that initially there was a range of interested parties for the business. But it decided to move onto an exclusive basis with one purchaser today. Earlier last week there had been rumours that the company had entered into exclusive negotiations with JP Morgan Partners, something WH Smith vigorously denied.

Going forward, “the company’s strategy is [to be] a customer focused retail business both domestically and internationally, which will be supported by its publishing businesses”. The news did not effect the WH Smith share price, which remains broadly unchanged at £5.40.