Alliance Boots, Britain’s biggest chemist chain, on Friday night became the latest major high street target of a private equity firm.
Kohlberg Kravis Roberts, the private equity powerhouse that is part of the consortium stalking J Sainsbury, has joined forces with Stefano Pessina, Alliance Boots’ billionaire executive deputy chairman, in an effort to buy the company for £10 a share.
The news is likely to intensify the political debate about the power of private equity firms.
The friendly approach, which values Alliance Boots at £9.7bn, comes a mere seven months after the merger of Alliance UniChem, Mr Pessina’s drugs distribution business, with Boots the Chemist, the health and beauty chain.
News of the potential bid sent the shares soaring 115p, or 14 per cent, to 930p, valuing Alliance Boots at £9bn with an enterprise value of £10.2bn. The business was worth £7.78bn at the time of the merger last August.
The offer is the latest in a deal frenzy by private equity groups that are putting to work record sums of their capital in M&A transactions all over the world.
KKR and Mr Pessina, who has a 15 per cent stake in Alliance Boots, said the proposal was subject to due diligence, which could take three weeks once started. It is thought that Mr Pessina would re-invest heavily in the business should the bid be successful.
Mr Pessina’s approach raised some eyebrows in the City given that the Italian-born billionaire had only just got his feet under the table in the enlarged group.
The entrepreneur had wanted to merge with Boots for years before he achieved his goal, having made a rebuffed approach in 2000. The enlarged group owns 2,400 pharmacies and health and beauty stores across the UK.
However, it is understood that the board is united behind the possible takeover. In the statement, KKR and Mr Pessina said their objective was to “work closely with the existing management team to achieve the long-term vision, building a global leader in the healthcare services and beauty industries”.
It is thought that Mr Pessina is keen to press on with growing the business and thinks this can be done more quickly in the private sphere. One analyst said on Friday: “He has little interest in being quoted.”
The company has underperformed the food and drug retail sector by 5 per cent this year.
Additional reporting by Jim Pickard and Chris Hughes