Nigel Rudd, chairman of Alliance Boots, showed his muscle on Monday as he rejected a £9.7bn bid approach from Kohlberg Kravis Roberts, the private equity powerhouse, and Stefano Pessina, his executive deputy chairman, saying that the £10 a share offer was too low to get the chemist chain to open its books.
In a statement, the company said: “The board does not believe it [the offer] reflects the fundamental value of the company or the attractive prospects, opportunities and synergies available to Alliance Boots following the very recent completion of its merger.”
Mr Pessina, the biggest shareholder with a 15 per cent stake, and his long-term partner and board member Ornella Barra were not present at the meeting.
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.
Sir Nigel’s rebuttal comes after a weekend of speculation suggesting that the chairman would find it hard to rebuff Mr Pessina, given that the executive deputy chairman is a key shareholder and the man behind Alliance Boots’ growth strategy. However, sources close to Boots’s chairman pointed out that Sir Nigel is a tough negotiator, who rejected two approaches for Pilkington from Nippon Sheet Glass before finally accepting the £2.2bn offer last year.
Sir Nigel has explicitly told Richard Baker, chief executive, that he must not discuss the bid with Mr Pessina, who wants to keep the current management team on board.
Despite attempts to isolate Mr Pessina from the rest of the board and its advisers, Sir Nigel is faced with a delicate and complex situation. Mr Pessina is Alliance Boots’ linchpin. It was he who drove through the Boots-Alliance UniChem tie up last year and he who runs group strategy.
Mr Pessina is also the company’s biggest shareholder and is well-represented on the board, given that three of the six non-executives come from the Pessina camp. In addition to this, his desire to keep the current management team on board should garner support in the executive team.
KKR and Mr Pessina will now be mulling whether to come back with a higher offer.
Boots shares, which jumped 14 per cent on Friday before the takeover approach was announced, hit their highest level since the merger last August hitting £10.05 before closing up 7.2 per cent or 56½p at 997p, valuing the group at about £9.7bn.
The company, which was formed through a £7.8bn merger of Alliance UniChem and Boots last August, had underperformed the food and drug retail sector by 5 per cent this year.
Additional reporting by Peter Thal Larsen
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