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Hodder Headline on the block

5 July 2004

Troubles at high street giant W H Smith may now affect its publishing arm, Hodder Headline. Under its new chief executive, Kate Swann, Smith's has been struggling to reinvent itself whilst dealing with a takeover bid from Permira. The discovery of a large hole in the pension fund, variously reported as £215 million or £190 million, has led to the plan to sell off its profitable publishing arm, Hodder Headline.

Investors are unhappy about W H Smith's recent performance, but it's worth remembering that it is a sleeping giant. As the Bookseller sagely remarked some time ago: 'WHS still sells an awful lot of books... More than half the population are light or non-readers, whom WHS is better equipped than any other retailer to attract. These consumers have not disappeared just because retail analysts say that modern retail has left them behind.'

There's no doubt that Hodder Headline would make a tasty snack for various big publishing groups which are still struggling to position themselves internationally, especially in the key English language markets. The French group Lagardere, still in acquisitive mood after gobbling up a large chunk of French publishing in its recent purchase of Editis, is rumoured to have already made a bid of £230 million. Lagardere has paid two times sales for Editis - the same multiple would mean that it might pay £316 million for Hodder Headline, and its educational arm would be particularly valuable to the French group.

Other possible purchasers are rumoured to be HarperCollins, which already has a large presence in the UK in publishing areas which duplicate Hodder Headline's commercial publishing, and US publisher Simon and Schuster's parent company Viacom. The latter has a UK arm which is generally reckoned to be too small to compete adequately in the battle of the titans.

Tim Hely Hutchinson, the highly respected CEO of Hodder Headline, has been reassuring about the possibility of a sale: 'There is a tendency to think that corporations are evil, but people are incredibly conscious of the value of creative people and management who can make a profit.' Hodder Headline authors and staff should be reassured by this, but may still find it a little unsettling that their publisher is for sale and the outcome uncertain.