WH Smith buyer faces year-long ban from mass store closures
WH Smith would have the right to cancel a year-long TSA with Modella if a CVA was launched before the first anniversary of the transaction's completion
The new owner of WH Smith’s high street chain has effectively been banned from enacting widespread store closures for at least 12 months following the acquisition of the chain in March.According to Sky News, WH Smith would have the right to cancel a year-long transitional services agreement (TSA) with Modella if a company voluntary arrangement (CVA) was launched before the first anniversary of the transaction’s completion.
The clause in the TSA, which enables Modella Capital to continue using WH Smith’s systems after it takes ownership, is “significant”, sources told Sky.
WH Smith agreed to sell its 480 high street shops to Modella in a £76m deal in March, with Modella planning to rebrand the chain under the name TG Jones following the acquisition.
WH Smith will retain its stores in airports, hospitals, railway stations and motorway service areas in the UK, as well as its significant operations in other countries.
The high street stores will keep the same products and services, including the Post Office and Toys “R” Us, and continue to trade as normal while Modella Capital works with the management team to define and execute a strategy to introduce new ranges and other offerings in the future.
The latest development follows reports that Modella will launch CVAs at both Hobbycraft and The Original Factory Shop (TOFS), both of which it took over in recent months.
Last month Sky reported that Modella was preparing to unveil a rent cuts package for its store landlords as part of plans for a CVA for TOFS. Sky reported that “dozens” of TOFS stores could close under the CVA, while a major distribution centre could also feature in the proposals, amid demands for two-year rent-free periods, according to sources.
Meanwhile, Hobbycraft is set to close nine stores, a move affecting up to 126 jobs, as part of a restructure led by Modella. The Hobbycraft CVA is expected to take a similar form to the restructuring at TOFS.
A spokesman for Modella told Sky: “We have a number of exciting plans for the future of TGJones. A CVA is not on the agenda, as it is a solvent business.”
WH Smith has been approached for further comment whilst a Modella spokesperson declined to comment.
