Retail giant WH Smith made just £10m from the sale of its 480 high street stores to a private equity firm after already slashing its asking price.
Private equity firm Modella Capital bought WH Smith’s high street locations in a £42m deal last year but is poised to launch an emergency restructuring as the stores – renamed TG Jones – struggle under their new owner.
WH Smith’s £42m valuation was already a sharp downgrade from the £76m price tag held by the retailer when it first struck a deal with Modella, as the asking price was later slashed to reflect a “sharp deterioration in trading conditions”.
Modella, which has snapped up a string of struggling high street retailers in recent years, paid only £10m upfront to WH Smith, according to documents circulated to its creditors.
The remaining £32m was left contingent on TG Jones’ future cash flows, The Sunday Times has reported.
But TG Jones is now battling to keep collapse at bay, as it enters an “aggressive” restructuring which could see as many as 150 stores close.
Modella says the survival of the 234-year-old business is at stake, just a year after the Mayfair-based equity firm declared its ambition to position the retailer as the “hub of the high street”.
The private equity firm had previously delayed the restructuring, which was initially due to be kicked off last month.
Modella in urgent plea to WH Smith
The rescue plan, advised by consultancy Teneo and law firm Slaughter and May, was dubbed “aggressive stuff” by a City source.
Modella recently approached WH Smith to ask the retailer to fund redundancy payments for TG Jones staff likely to lose their jobs in the restructuring, The Sunday Times has reported.
“It had been assumed that, in addition to wanting to assist its previous employees, WH Smith would be open to providing some form of formal support to the business alongside other stakeholders in the context of the restructuring and business turnaround,” a document issued to creditors stated.
It also emerged last week that Modella is charging TG Jones millions of pounds to use its new name.
Modella is owed £2.9m in royalty fees for the former WH Smith stores’ use of the fictitious “family” name, The Guardian has revealed.
The equity firm said the rebranded TG Jones stores are struggling because their loss of the WH Smith title has “negatively impacted consumer awareness, despite the fact that the proposition has improved”.
Modella’s recent buys go under
Modella Capital has snapped up a string of high street retailers in recent years, often offloading the acquisitions soon after purchase.
The Original Factory Shop and Claire’s Accessories shut all of its stores last month, after the two retailers were put into administration less than two years after being bought by Modella.
Modella was formed as Tailer Debtco in 2022 before being renamed to Modella a year later and is owned by Hay Wain Group and led by retail investor Steve Curtis.
WH Smith – which retained its stores in airports, hospitals and train stations in the deal with Modella – said last month the travel disruption caused by the Iran war will cause its profit to slump.
