Walgreens Boots Alliance admits that it is abandoning an auction of the main high street pharmacy in the United Kingdom because of the deteriorating financial climate.
In response to volatile global debt-financing markets, the owner of Boots the Chemist has abandoned plans to sell Britain’s largest high-street drugstore firm.
Walgreens Boots Alliance confirmed that, following a lengthy auction process, it had elected to maintain control of Boots.
The New York-listed healthcare behemoth stated in a statement that it had performed a comprehensive strategic review, but would now retain control of the “successful” Nottingham-based company.
“WBA is delighted by the productive discussions it has had with a variety of parties and the strong interest it has received from prospective buyers.”
“However, since the commencement of the process, the global financial markets have experienced major and unanticipated shifts.
“Because market uncertainty has had a significant influence on the availability of finance, no third party has been able to submit an offer that sufficiently reflects Boots and No7 Beauty Company’s high potential value.
Therefore, WBA has determined that it is in the best interests of its shareholders to continue focusing on the expansion and profitability of the two companies.
The decision will cast questions on the long-term strategy of a UK high street mainstay that had been deemed as non-core to the survival of its American parent company.
WBA stated on Tuesday that it was dedicated to investing in Boots’ future, but that it was open to pursuing a sale or other type of corporate action in the future.
In recent weeks, the £5.5bn auctions of Boots have stalled significantly, with the sole bidder to make a binding offer – a consortium of Apollo Global Management and Reliance Industries – putting its hopes on the perseverance of four lenders.
Apollo and the Indian behemoth Reliance have lined up Royal Bank of Canada, Credit Suisse, Santander, and Bank of America to assist in financing a substantial portion of the £5 billion-plus deal.
Boots was one of the largest leveraged buyouts in Europe; yet, mounting concerns about the global economy had prompted significant skepticism among the major banks that finance leveraged buyouts.
WBA was willing to keep sizable minority ownership in Boots for the deal to be finalized, due to the difficulty bidders were having in financing a deal.
Another potential bid from Asda’s owners, Mohsin and Zuber Issa and TDR Capital, had been even more precarious.
Goldman Sachs-advised WBA had been in negotiations with potential purchasers for months.
Finding a suitable solution for Boots’ £8 billion pension system, one of the largest private retirement funds in the United Kingdom, was one of the main obstacles facing prospective acquirers.
An apparent early frontrunner in the Boots auction, a joint proposal from Bain Capital and CVC Capital Partners, had withdrawn due to skepticism regarding the price tag of up to £6 billion.
Rosalind Brewer, chief executive officer of the WBA, stated, “We have now concluded a comprehensive examination of Boots and No7 Beauty Company; the result reflects quickly changing and difficult financial market conditions beyond our control.”
“It is an exciting time for these companies, who are perfectly positioned to continue capitalizing on future potential afforded by the expanding healthcare and beauty markets.
“The board and I continue to believe that Boots and No7 Beauty Company have solid fundamental value, and we will remain open to all alternatives to maximize shareholder value for these businesses and throughout our organization over the long term.”
Boots, like many retailers, experienced a tumultuous era, and as a result of a restructure of its Nottingham head office and store management teams, announced 4,000 job losses in 2020.
In addition, it has been involved in disputes with landlords over late rent payments.
Shortly before the pandemic, Boots designated approximately 200 of its UK outlets for closure in response to shifting buying preferences.
The history of Boots dates back to 1849 when John Boot opened a natural medicines business in Nottingham.
In 1933, the company launched its 1,000th store in the United Kingdom.
For WBA chairman Stefano Pessina, a decision to sell Boots would have marked the end of his engagement with one of Britain’s most recognizable brands.
The Italian octogenarian orchestrated the 2006 merger of Boots and drug wholesaler Alliance Unichem, with KKR acquiring the merged company for £11 billion the following year.
Walgreens purchased a 45 percent stake in Alliance Boots in 2012 and completed its acquisition of the company two years later.
