Modella price-chips WH Smith deal by at least 23 per cent

Back in March 2025, private investment form Modella Capital offered to buy WH Smith’s high street business for £52 million. The acquisition was believed to have been initially structured as an all-cash offer.

However, soon afterwards Modella began a re-trading (price-chipping) strategy, and sought to renegotiate better terms, citing a weaker trading outlook and reduced cash flows from the stores.

It succeeded in eventually striking a deal at £40 million, £12 million less than the original offer. But in reality, the new deal was far better than that.
Under the renegotiated deal terms, only £10 million will be received by WH Smith upfront.

£20 million will be payable on a deferred basis, depending on the company’s cash flow performance up to August 2026.

And a further £10 million might be paid on the value of certain tax assets, where some time component is also involved.

WH Smith has conceded that the revised structure “ensures the transaction remains viable and beneficial for shareholders”.

WH Smith anticipates headline net debt to be in the vicinity of £425m by the end of August 2025.

According to the company, its travel divisions continue to trade in line with expectations as it enters the peak period over the summer. The company added that it is positioned to focus entirely on its international travel retail operations, which it described as offering “substantial global growth opportunities”.

What was the rationale for the acquisition of Modella Capital by WH Smith?

This can be understood within the context of several key market dynamics:
• Systematic Undervaluation of UK Companies: UK mid-cap firms, including WH Smith, were trading at historic discounts - often 40 to 50 per cent below analysts’ fair value estimates, due to sustained outflows from UK equity funds and a lack of domestic institutional support.

• Buy-and-Build Strategy: Modella Capital, like many acquirers in 2025, targeted undervalued UK platforms with the intention of scaling through further acquisitions or operational improvements. The goal was to integrate businesses, achieve synergies, and eventually exit at higher global multiples.

• Sector Resilience and Brand Strength: WH Smith’s established brand, diversified revenue streams (across travel and high street retail), and strong cash generation made it an attractive platform for Modella’s growth ambitions, especially as the UK retail sector showed resilience post-pandemic and amid economic recovery.

• Favourable Financing Conditions: Lower base rates compared to previous years made acquisition financing more attractive, and Modella Capital likely saw an opportunity to leverage WH Smith’s relatively stable cash flows.

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