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The buyer of WHSmith’s high street business has renegotiated the price downwards after trading at the chain deteriorated in recent weeks.
WHSmith now expects to receive gross cash proceeds of up to £40mn from the sale to Modella Capital, compared with the £52mn it had projected when it first announced the deal on March 28, the company said in a stock exchange statement Monday.
The renegotiation with Modella, which plans to change the name of the 233-year-old business to TG Jones, comes after “the future of the high street business under a change of ownership has led to a more cautious outlook amongst stakeholders”, WHSmith said in a statement.
The sale has now completed. The news of the revised deal terms sent the share price down almost 5 per cent in morning trading in London.
Modella, a UK consumer and retail investment company, which also owns HobbyCraft and The Original Factory Shop, said in March that it “believes strongly in the future of the high street” following previous speculation by some analysts that a new owner could consider store closures in an efficiency drive.
On Monday, WHSmith said the two sides had entered talks over amendments to the deal “given the original agreement was no longer deliverable”.
WHSmith still has about 1,300 stores globally, located in airports, train stations and hospitals. The group has offloaded all 480 outlets on high streets, in shopping centres and retail parks to focus on its lucrative travel retail business, which accounts for the majority of its sales and profits.
Analysts at Goldman Sachs said on Monday that “while the revised terms are slightly disappointing and will [probably] be the focus of the market”, the sale of the high street arm was a welcome “step to transforming WHSmith into a pure-play travel retailer”.