Card Factory will buy online personalised card company Funky Pigeon from WH Smith for £24million.

It comes as WH Smith sells off its non-core assets, as well as its high street business, to become a pure-play travel retailer with stores in airports and train stations.   

The deal also marks a significant shift from the high street to online for Card Factory, which told shareholders on Tuesday the takeover will make it the second largest online card and attached gift retailer in the market.

Over the last two years, Funky Pigeon has generated around £32million revenue per year and £5million in adjusted earnings before nasties..

The deal, which values Funky Pigeon at £26million, represents approximately five times Funky Pigeon’s earnings.

Card Factory said the acquisition would accelerate the company’s existing digital strategy.

Chief executive Darcy Willson-Rymer added: ‘This acquisition marks a significant step forward in Card Factory’s strategy to build a scaled, competitive digital presence in the celebration occasions market.

‘It brings a high-quality platform and proven technology, accelerating our ability to compete in the direct-to-recipient card and gifting segment, so supporting our ambition to become the leading omnichannel retailer in our sector.’

The deal will be funded from a drawdown of up to £35million under Card Factory’s existing borrowing facility.

Once approved, it plans to extract ‘annual synergy benefits of more than £5million’.

Its outlook for the year - of mid-to-high single-digit percentage growth in sales and adjusted profit - remain unchanged.

FTSE 250-listed Card Factory shares were up 8.1 per cent to 96p by midmorning on Tuesday.

WH Smith said the Funky Pigeon sale followed a ‘strategic review’ of the business and ‘will be used to improve the group’s net debt position.’

It marks the latest asset disposal for the high street stalwart, after it group agreed a £76million sale of its high street business to Hobbycraft owner Modella.

The sale of its high street arm comes after years of under-pressure sales and profits at the division, while WH Smith’s travel business has grown to make up the bulk of its sales and profits, with more than 1,200 stores across 32 countries.

It will focus its efforts on its stores in train station and airports, ditching the WH Smith name for the TGJones brand.