WH Smith sells off publishing arm

UK retailer WH Smith announced an “important milestone” in its revival today after agreeing to sell its Hodder Headline book publishing arm for £223m (€337.6m).

Chief executive Kate Swann said the sale to French publishing house Hachette Books would help simplify the structure of the UK group, which has seen sales wilt in the face of strong competition from supermarket rivals.

As previously announced, investors will benefit from the proposed disposal as the company said it planned to return £207m (€313.5m) of the proceeds – equivalent to 85p a share – to shareholders.

Hodder Headline is home to many best-selling and award-winning authors, including Tom Clancy, Martina Cole and thriller writer James Patterson. It also published footballer Paul Gascoigne’s recent autobiography.

The business, which generated sales of £144m (€218m) in the year to August 31, was founded as Headline in 1987 and acquired Hodder & Stoughton in the following year before being bought by WH Smith for £185m (€280m) in 1999.

Today’s new owner is paying £210m (€318m) in cash and £13m (€19.7m) to cover a pension deficit at Hodder.

Hachette Books was created in 1826 and has 40 publishing houses in France and across Europe, including the Octopus and Orion groups in the UK. It publishes around 5,000 new books each year.

The sale of Hodder, which employs 833 people worldwide, had been expected for some time as WH Smith recovers from one of the toughest years in its history.

In April, WH Smith said it would reduce office headcount by a quarter after an “unacceptable” performance caused half-year profits to drop 29%.

Private equity group Permira then failed with two separate attempts to buy the Swindon-based group before Ms Swann last week outlined an updated strategy for reinvigorating the business.

She said today: “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 disposal of Hodder Headline is still subject to approval by shareholders at an extraordinary general meeting of WH Smith.