Smiths News digests rival Dawson

By THIS IS MONEY
Updated:

 

Smiths News is to swallow up Dawson Holdings for £20m in a deal it hopes will boost its position in the eBook market.

A Kindle

Helping hand: Smiths hopes Dawson will provide an eBook platform for its own wholesaler Bertrams

The newspaper and magazine wholesaler will shell out 17.72p per share, a premium of 24% on Dawson's closing price yesterday.

Smiths, which was created in 2006 following its demerger from retailer WH Smith, said the deal would enhance earnings immediately.

It also expects to achieve annual cost savings of £3.8m by the end of its financial year ending August 2014.

Its shares are up 3.25p at 97.25p in trading today, while Dawson has put on 2.5p to 16.75p.

Smiths said Dawson's largest trading division - Dawson Books, which supplies to 80% of the country's universities - would provide an established eBook platform for its own book wholesaler Bertrams.

In addition, the acquisition of Dawson - which employs 408 staff - will help Smiths and its subsidiaries tap into new markets including universities and airlines.

Smiths is proposing to transfer a number of Dawson's staff to its own locations in Norwich, Swindon and Bradford and warned staff who do not transfer would be at risk of redundancy. The proposals will be subject to consultation and there will be no immediate changes.

Dawson can be traced back to the early 19th century and has three divisions - Dawson Books, Dawson Media Direct, which supplies newspapers and magazines to airlines, and Dawson Marketing Services.

It is best known for its newspaper and magazine distribution business, which it put into administration two years ago.

Dawson News lost millions of pounds worth of contracts from the likes of Trinity Mirror, News International, Telegraph Media Group and Daily Mail publisher Associated Newspapers.

The assets of Dawson News were snapped up by rivals including Smiths News and John Menzies for around £2m in 2009.

The remaining three divisions at Dawson will be sold to Smiths News subject to shareholder approval.

Hugh Cawley, Dawson chief executive, said: 'The offer follows the board's successful restructuring and turnaround plan, which first rescued the Dawson Group from the risk of administration and more recently returned the group to profit growth.'

Smiths has proposed combining Dawson Books and Bertrams at the latter's Norwich facility. This would see Dawson's Rushden, Northamptonshire, warehouse close and staff transfer to Norwich. Dawson Media Direct's financial support functions at Langley, Northamptonshire, will be transferred to Swindon or Bradford.

Dawson's head office at Epsom, Surrey, will be closed under Smiths' proposals.

Combining Dawson Books, which has a database of 16m titles, and Bertrams will increase Bertrams' revenues by 32%, Smiths said.

View from the City

'This deal looks positive and is enhancing to Smiths,' said Andy Murphy of broker Singer Capital Markets. 'However, we believe it could be the first of a number of deals as the total cost is £20m and we believe Smiths' 'war chest' is significantly larger.

'Dawson Group enhances Smiths' Bertrams Books business, adding a third to its scale, and enhancing the eBooks offering. Dawson Media Direct and Dawson Marketing Services adds two other profitable elements to the group.'

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Most watched Money videos

{"status":"error","code":"499","payload":"Asset id not found: readcomments comments with assetId=1725751, assetTypeId=1"}