Plans to sell billions of pounds British chemist Boots have hit a string of troubles after a potential buyer walked away and bidders raised concerns about financing a deal with unstable market because Russia Invades Ukraine.
A consortium of Bain Capital and CVC Capital, formerly considered as a leading candidate to acquire the business from US parent Walgreens Boots Alliance, did not place a bid ahead of schedule last week, two people with knowledge of the matter said.
The initial, non-binding bids came from the American acquisition group Apollo and from the owners of the supermarket group Asda – brothers Mohsin and Zuber Issa and private equity firm TDR Capital.
The Asda team has proposed two alternative deals, where the supermarket group or its owners could lead the acquisition, a person familiar with the process said.
New York-based Sycamore Partners, which owns office supplies company Staples and whose WBA senior advisor John Lederer is on the board, also expressed interest, said another person familiar with the process. said, although it is unclear whether the group will submit a bid.
Walgreens Boots and private equity firms both declined to comment.
Dominic Murphy, also a WBA board member, oversaw CVC’s preparation for a viable offer and has repurposed himself from board discussions on the process. this program.
CVC and Bain are considered particularly well positioned because of the involvement of Murphy, a key figure in KKR’s purchase of Boots more than a decade ago, and their past in retail and consumption.
Chain of pharmacies by Put up for sale by the WBA late last year, as it focuses on retailing and expanding medical services in its domestic market.
Boots, which has more than 2,000 stores in the UK, is expected to attract strong interest because of its market-leading location and brand, stability of pharmacy earnings and potential improve financial performance.
But one person who has watched the process says it’s remarkable that the field seems relatively narrow.
The person said there is no doubt that Walgreens is serious about divesting Boots, but that the retailer’s intention to “move at speed” contrasts with the way the process is conducted and the level of information being communicated. provided.
“I still think a deal will be done, but in a rather non-linear way,” the person concluded.
Another person involved said the process was “somewhat slow” because potential bidders had little access to the information needed to perform due diligence and no deadlines for clear bids. tie.
Sky News first reported on Bain and CVC’s withdrawal.
According to another person with knowledge of the process, funding is “a key consideration” for all potential private equity buyers.
Large purchases are often financed by short-term bank loans that are then refinanced in the bond market. But that process was inherently difficult even before Russia’s invasion of Ukraine caused turmoil in debt markets.
Clayton, Dubilier & Rice have yet to tap the bond market for a refinancing package backing the £10 billion acquisition of supermarket group Wm Morrison, agreed in October, while the retailer’s value Matalan also recently decided against trying to refinance his £500m debt.
Boots has a large defined benefit retirement plan, which is surplus but not enough to allow an insurance company to buy it back. That would make any buyer responsible for ensuring that the program remains fully funded, unless Walgreens can be persuaded to keep it.
Still, the business remains an attractive asset, according to first person. “There is huge potential in this company,” he said. “People are taking better care of themselves after Covid and the NHS is finding ways to offer more services through pharmacies.”
Boots accounts for around 45 per cent of revenue from providing services to the UK’s state health agency, including prescriptions and vaccinations.
Boots’ cost of boutique real estate could plummet in the coming years as leases are renewed. WHSmith, a stationery retailer with a smaller portfolio but focused on upscale neighborhoods, reported securing an average rent reduction of 50% when it renewed its lease.
