The FTSE 250 company, which has been running a “managed decline” of its high street shops while enjoying fast growth from its travel wing in airports and railway stations, announced a £312mln acquisition of US travel retailer Marshall Retail Group on Thursday morning.
The latest acquisition shows WH Smith’s travel wing pulling up on the joystick with its international business, as MRG owns 170 stores in North America, 59 of which are inside airports.
Peel Hunt called the takeover a “bold and strategically sensible move” and rated the retailer ‘buy’, saying the shares are “materially undervalued” at current levels.
Second US deal
MRG ties in well with last November’s acquisition of US-based tech vendor InMotion, Peel Hunt analysts said, also pointed to the “stellar” recent form of the new addition, winning 75% of all pitches it went for which adds a pipeline of up to 36 new airport store contracts, including 24 to open this year.
The analysts noted: “Of course there is risk involved with such a major acquisition, but it strikes us that Las Vegas-based MRG is a good business in the first place (as was InMotion), and WH Smith will be able to finesse its ranging and approach to create a very competitive US travel retailer.”
Net debt, which WH Smith already doubled to £180mln in the last quarter due to the InMotion deal, will swell further as management intends to take on more bank loans to fund the MRG acquisition, in addition to an equity placing.
Shares in the company were up 7% to 2,244p by Thursday afternoon.