WH Smith made just £10m from the sale of its 480 high street stores to private equity firm Modella Capital, after already slashing the asking price from £76m to £42m. The remaining £32m was contingent on future cash flows of the rebranded TG Jones chain, which is now struggling and facing an emergency restructuring that could close up to 150 stores.
Restructuring Crisis
Modella Capital, which bought the stores last year, is now launching an aggressive restructuring to save the 234-year-old business. The plan, advised by Teneo and Slaughter and May, has been described as “aggressive stuff” by a City source. Modella had delayed the restructuring, originally planned for last month, and has approached WH Smith to fund redundancy payments for staff likely to lose their jobs.
Financial Details
According to documents circulated to creditors, Modella paid only £10m upfront, with the rest tied to TG Jones’ performance. The £42m valuation was a sharp downgrade from the initial £76m price tag, reflecting a “sharp deterioration in trading conditions”. Modella is also charging TG Jones £2.9m in royalty fees for using the fictitious “family” name.
Impact of Rebranding
Modella said the loss of the WH Smith name has “negatively impacted consumer awareness, despite the fact that the proposition has improved”. The rebranded stores are struggling, and Modella’s other recent acquisitions, such as The Original Factory Shop and Claire’s Accessories, have also been put into administration.
WH Smith's Future
WH Smith retained its stores in airports, hospitals, and train stations, but warned last month that travel disruption from the Iran war will cause its profit to slump.
