Equity fund takes over Whitcoulls

By PAUL PANCKHURST

British bookselling giant WH Smith is bailing out of the 70-store Whitcoulls and Bennetts bookselling chain after less than three years of ownership.

It said yesterday it was selling a bundle of Asia Pacific assets to the Sydney private equity firm Pacific Equity Partners for $136 million.

Two months ago, WH Smith's Asia Pacific executive chairman, Malcolm Edwards, told the Business Herald it was nonsense to say Whitcoulls was going up for sale.

Investment banking firm Credit Suisse First Boston and its New Zealand representative, First NZ Capital, jointly advised PEP, and Macquarie advised WH Smith.

The New Zealand book chains and the Australian book chain Angus & Robertson make up the bulk of the assets.

They also include an Australian calendar business and nine airport stores in Hong Kong.

The 600 permanent and 520 part-time and casual staff of Whitcoulls and Bennetts can expect yet another owner in three to five years.

That is the typical time-frame for private equity investors, who try to improve assets, then sell them for a profit.

PEP managing director Rickard Gardell said from Sydney that about 10 managers of the Asia Pacific business would buy a shareholding of more than 5 per cent in the business, and would also have a "significant" options scheme.

Gardell was guarded on how Whitcoulls might change.

"We like the management team - we like the operations," he said.

"We see it as a long-term investment."

On the split between the Australian and New Zealand operations, Gardell said NZ accounted for about half of sales and slightly more than half of profits.

PEP said Whitcoulls was New Zealand's leading book and stationery brand.

It had a 40 per cent share of the book market, 30 per cent of personal stationery and 25 per cent of video and DVD sales.

PEP is known in New Zealand for floating companies such as Frucor and Vertex on the stock exchange.

The sale is conditional on "financing, regulatory approvals and certain landlord consents".

WH Smith said the businesses generated $14.3 million of operating profit in the year to last August.

At that time, it had net assets of $79 million.

WH Smith paid $126 million for Whitcoulls and Angus & Robertson in 2001.

The company said it was reviewing the Asia Pacific assets after a severe profit warning and a share price slump caused by poor Christmas sales in the UK.

Whitcoulls is a slice of retailing history.

Its origins go back to the formation in 1883 of stationer and printer Whitcombe & Tombs.

In 1971, Whitcombe & Tombs merged with another South Island company, Coulls Sommerville Wilkie, creating Whitcoulls.

The company's owners subsequently included Brierley Investments, Graeme Hart's Rank Group, Blue Star, US Office Products and, finally, WH Smith.