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Tomorrow the world

9 August 2004

This week's sale of Hodder Headline will come as no surprise to News Review readers (see 5 July). The problems of parent company W H Smith have been much documented and the sale of Hodder Headline always looked like a good way of giving some cash to shareholders whilst at the same time being seen to do something about Smith's own problems. The price paid was £210m ($388m) in cash and the assumption of Hodder Headline's £13m ($24m) pension deficit, and the company proposes to return most of this to shareholders at 85p ($1.56) per ordinary share.

Hodder Headline has not been a bad acquisition for W H Smith. It has consistently turned in a profit and grown steadily and rapidly, but there has always been a feeling in the City that Smith's had no business owning a publisher and should stick to retailing. Other publishers and booksellers have always felt distrustful of a too-close relationship disadvantaging them, although from the outside it simply looked as if there was an easy fit between Hodder Headline's commercial fiction publishing and what W H Smith's customers wanted.

The Hachette-owned companies in the UK (Hodder-Headline, Orion, Franklin Watts and Chambers-Harrap) will now constitute the second-biggest publishing group in the UK. The French-owned group will be positioned to give Random House a run for its money. Tim Hely-Hutchinson retains his position as ceo of Hodder-Headline and takes on a new role as chief executive of the £275m ($508m) Hachette UK book group. He is widely liked and respected and this will be seen as one of the most positive aspects of the sale.

Hachette have a reputation for running their companies separately, so this acquisition will not have the possibly devastating effects of cuts in staff and publishing lists which a purchase by Penguin or HarperCollins (both of which were reputed to be in the running) would have had. Big publishing has just got bigger, but authors will not suffer from this acquisition.

The Americans used to be seen as taking over British publishing, but now Hachette has continued the European trend set by Bertelsmann, the German owner of Random House. The next step for Hachette will be the world. As it positions itself for the global English language publishing market the group will have to look for an American acquisition. But it will do so from a much-strengthened base.