WH Smith is in talks to sell off its high street retail operation to focus exclusively on the growing travel division of stores in airports and railway stations.
The FTSE 250 group confirmed this morning it was exploring potential strategic options for the high street following press speculation over the weekend.
WH Smith said options for the “profitable and cash-generative” part of the group included a possible sale of the 600 shops.
The company has appointed bankers at Greenhill to run the process, with a deal expected in the coming months, reported Sky News on Saturday.
Interested parties in the high street shops include private equity investor Alteri and turnaround specialist Hilco, two people familiar with the process told The Financial Times.
WH Smith cautioned this morning there could be “no certainty that any agreement will be reached, and further updates will be provided as and when appropriate”.
Analysts at Peel Hunt noted management at WH Smith wanted investors to have a “purer” asset to invest in, and to give all stakeholders greater focus on the travel side of the group.
The broker did not expect the high street chain to attract a high multiple given the retail sector currently falling out of favour with investors.
“Management is not doing this for the proceeds (a peer group multiple would imply not much more than £100m), it is for greater focus on travel,” Peel Hunt analyst Jonathan Pritchard added. “The headwinds in UK retail are well known and the list of interested parties is likely short.
“The logic is clear but with most investors already applying a low value to high street, the news probably will not move the dial much.”
Shares in WH Smith shot up 6.1% to 1,218p this morning as markets opened.
WH Smith boosted revenues by 7% to £1.9bn in the year to 31 August, but sales on the high street fell 4% to £452m. Profits on the high street also remained flat at £32m.
The travel business now has more than 1,200 stores across 32 countries and generates 85% of the group’s trading profits.
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