The purchase gives WH Smith access to the US travel market, the largest and most lucrative of its kind.
To give some idea of its sheer size, there were 285mln trips through UK airports last year. In the US, there were 1.7bn, and that figure is set to rise to 2.2bn by 2022.
“It’s impossible to be described as a global travel retailer without access to the US,” wrote Peel Hunt in a note to clients. “The deal, at a stroke, doubles the size of WH Smith’s international arm.”
The analysts add that InMotion’s relationships with landlords across the pond can “unlock the door” to WHS’s core travel format – the part of the business that’s been keeping the rest afloat – appearing in the US.
On the flip side, under WHS’s wing, they expect InMotion will be rolled out across other territories.
“Local competition will commonly be tough as InMotion expands but its increased scale should ensure a pricing advantage.”
Initial market reaction ‘stingy’
WH Smith shares rose 6% yesterday (Tuesday), but Peel Hunt reckons that was a little underdone, given the benefits the purchase brings.
“The shares reacted well to the deal but didn’t re-rate. After a long period under a cloud, and with a strong current trading statement alongside the deal, that’s a stingy reaction.”
In line with the bullish commentary, the broker hiked its price target to 2,100p (from 1,950p) as it moved to a ‘buy’ recommendation (from ‘hold’).
WH Smith shares were up another 6.7% in late-morning trade on Wednesday to 1,940p.