A prominent activist investment firm has begun building a stake in WH Smith, the travel retailer, weeks after it sold off its historic high street arm.
Sky News has learnt that Palliser Capital has acquired close to 5% of the London-listed company in recent weeks – worth about £65m at the current share price.
Sources said the stake was expected to be disclosed publicly at an industry conference on Thursday afternoon.
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Palliser, which recently led an effort to force Rio Tinto, the global mining group, to abandon its London listing in favour of Australia, is said to hold WH Smith’s management team – led by chief executive Carl Cowling – in high regard.
The investment fund believes, however, that returns to WH Smith shareholders could be bolstered through a series of self-help measures.
These included reviewing the travel retailer’s leverage targets and capital allocation policy to ensure better use of its balance sheet, according to one source.
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Improving investor communication and disclosure, and overhauling its executive incentive structure to align it more closely with the interests of shareholders are also on Palliser’s wishlist, the source added.
Shares in WH Smith are still trading at levels comparable to their lows during the COVID-19 pandemic, when the global travel industry faced near-total shutdown for long periods.
The company’s depressed share price is not unique to WH Smith, with SSP, the transport catering group, also drawing interest from activists in recent months.
WH Smith trades from more than 1,200 travel stores in over 30 countries.
“The group operates in structurally advantaged growth markets,” it said in April.
“Passenger numbers are forecast to grow in air travel by 2.5 times between 2024 and 2050, driven by both population and economic growth.
“Investment in airport infrastructure is also increasing across the globe creating more opportunities for airport retailing.”
Palliser is understood to have identified WH Smith’s high growth potential in the US as particularly attractive, and is said to believe that there is scope for its shares to nearly double in value in the next three years.
WH Smith’s decision to offload its town centre business, which dates back to 1792, was revealed by Sky News in January, and was viewed as a fresg symbol of the British high street’s decline.
Comprising about 480 stores and roughly 5,000 staff, the unit was sold to Modella Capital, an increasingly prolific investor in retail businesses.
The stores are being rebranded under the new name TG Jones.
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On Thursday afternoon, shares in WH Smith were trading at around £10.60 – down more than 10% over the last year, and giving the company a market capitalisation of £1.36bn.
A spokesman for Palliser, which led a successful campaign against the board of London-listed Capricorn Energy, declined to comment.
WH Smith has been contacted for comment.
