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WH Smith to acquire US specialty retailer Marshall Retail for $400M

WH Smith PLC said Oct. 17 that it signed a deal to acquire U.S.-based rival The Marshall Retail Group LLC from Brentwood Associates Inc. for $400 million in a bid to expand its international operations.

WH Smith, which operates about 1,600 specialty stores worldwide, including 100 airports across 30 countries, said that the acquisition of Marshall Retail Group will strengthen its presence in the $3.2 billion U.S. airport travel retail market and double the size of the U.K. retailer's international travel business. Marshall Retail operates 170 stores in North America across airports, resorts and travel retail channels.

The Swindon, U.K.-based retailer said it will fund the transaction through a combination of new debt and equity, including a new £200 million term loan facility provided by its existing relationship banks, expansion of the existing revolving credit facility to £200 million from the £140 million, and an underwritten placement of its new ordinary shares worth £155 million to institutional investors.

The proposed placement represents nearly 7% of WH Smith's existing share capital. Barclays Bank PLC and J.P. Morgan Cazenove are acting as joint book runners in connection with the equity placement.

WH Smith said it is suspending its share buyback program to support near-term deleveraging and expects to return to below its target 1.25x net debt/EBITDA leverage ratio by the end of the first full financial year following completion. The transaction, which is subject to the approval of shareholders and customary closing conditions, is expected to close in the first quarter of 2020.

"This acquisition will accelerate the growth of our International Travel business and combined with InMotion, the market-leading digital accessories airport retailer that we acquired last year, will significantly enhance our scale and growth opportunities in the US, a large and fast growing travel retail market," said, Carl Cowling, the incoming CEO of the company.

Michael Wilkins, CEO of Marshall Retail Group, will continue to lead the business.

On the same day, the retailer reported a 7% year-over-year increase in pretax profit to £155 million, compared with £145 million in 2018, for the year ended Aug. 31.

Group revenue for the full-year was approximately £1.40 billion, an increase of 11% from the previous year, with like-for-like revenue up 1%.

The company increased the final dividend by 8% to 41 pence per share, an increase of 8% on the prior year, giving a total ordinary dividend per share of 58.2 pence a share.

In morning trading in London, shares of WH Smith were up 8% at 2,254 pence per share.