Race For Boots Moving Ahead With Owners Of Asda In The Running

Namnews, 21st March 2022

Bidders for Boots are set to meet with the retailer’s management this week as the takeover race intensifies despite the volatile market conditions.

According to The Sunday Times, US private equity firms Apollo and Sycamore Partners are among the firms to have submitted non-binding bids for Boots thought to be worth around £7bn. They are competing against the Issa brothers and TDR Capital, who want to add the health & beauty chain to their retail empire, which includes Asda and the EG Group.

Three weeks ago, a consortium comprising of Bain Capital and CVC Capital Partners pulled out of the race due to the price expectations of the retailer’s owner, Walgreens Boots Alliance (WBA). They had been regarded as frontrunners because of the involvement of Dominic Murphy, a CVC partner who has been a key figure in Boots’ ownership over the last 15 years.

Yesterday’s report by The Sunday Times quoted a source close to WBA that said “four or five” interested parties remained.

The newspaper noted that Russia’s invasion of Ukraine has led to corporate debt markets seizing up, which could hamper the ability of private equity firms to finance an acquisition of Boots. It was suggested the Bain-CVC consortium could decide to re-enter the race if WBA decides to lower the asking price to secure a deal.

It is believed that private equity firms hope to extract value from Boots by investing in primary healthcare services and striking partnership deals with the NHS to turn some of its 2,200 stores into medical hubs where services could include blood tests, vaccinations, and physiotherapy.

WBA is selling the business so it can increase its focus on the lucrative US healthcare market.

NAM Implications:

• For UK suppliers, the one to watch will be the Issa brothers/TDR Capital bid…
• Meaning increased buying muscle via the Asda combination.
• Either way, any takeover will be heavily financed by debt.
• Meaning a forward-focus on financial performance, by brand…
• i.e. Key that NAMs sharpen skills in calculating cost…
• …and demonstrate the financial impact of their proposals on Boots P&L and Balance Sheet.