US. London-based WHSmith is selling its Atlanta-based US airport division, WHSmith USA Travel Retail, to US competitor Hudson Group in a deal valued at £41 million (US$64 million).
The deal was completed yesterday. The UK company will close its Atlanta corporate office, at the cost of around 100 jobs.
The total consideration of £41 million consists of £25 million (US$40.2 million) of cash and £16 million (US$25.8 million) of deferred consideration, payable by way of an interest-bearing loan note with a 5% coupon. WHSmith is selling 180 stores located in 23 airport locations together with certain assets and liabilities associated with the US airports business.
In the year to 31 August 2002, the US airports business generated sales of £133 million (US$214 million) and store contribution before central costs of £8 million (US$12.9 million).
The sale is conditional on receiving the necessary regulatory approvals and assignment of leases from the airport landlords. Both WHSmith and the Hudson Group anticipate the transaction will complete within two months.
WHSmith is also divesting its US hotel-based gift shops to a group headed by former WHSmith USA ceo Sean Anderson, under the name of Travel Traders. This separate sale includes 280 gift shops in several large hotel chains, including Hilton, Hyatt and Marriott for the sum of only £8 million (US$13 million or US$46,400 per store). WHSmith will retain a 15% interest in this entity.
Following completion of these transactions, WHSmith said in a statement that it will provide transitional services for the US hotels business until 29 February 2004, after which the head office in Atlanta will close. “WHSmith will retain no ongoing operational presence in the USA,” it said.
WHSmith sells books, magazines, newspapers, candy and other items in shops in Atlanta Hartsfield airport (the world’s busiest airport) in the atrium, international terminal and Concourse A. Newsstand employees at Hartsfield and other US airports will transfer to Hudson, said WHSmith group chief executive Richard Handover. Hudson already operates several newsstands at Hartsfield.
He said shareholders in Britain were increasingly nervous about the US businesses, and WHSmith did not want to make the kind of investment that would be needed to stay in the business for the long haul.
In a statement, he added: “WHSmith operated profitably in the US market for sixteen years, when a combination of an economic downturn and the terrorist attacks of September 11th moved the businesses from profit to substantial losses.
“While the airport retailing market is one in which we will continue to participate, in other parts of the world, the disposal of the hotels retailing business would leave a sub-scale business in the US. The Board therefore decided it was in the shareholders’ best interests to exit from both the US hotel and airport retailing markets.
“The disposals will be significantly earnings enhancing.” The company will continue to operate airport shops in the UK, Australia and New Zealand, where it also has a large non-airport retail presence.
Hudson Group president and ceo James Cohen said: “This is an important strategic development for the Hudson Group allowing us to extend the national recognition of the Hudson brand. This acquisition will raise Hudson Group’s premier retail footprint to 450 news and gift stores in North American airports and commuter terminals, establishing the company as the leading transportation retailer throughout North America.”
