The owner of Boots the Chemist has abandoned the sale of Britain’s biggest high street pharmacy chain amid torrid conditions in global debt-financing markets.
Walgreens Boots Alliance confirmed on Tuesday afternoon a Sky News report that it had decided to retain ownership of Boots after an auction process lasting for several months.
In a statement, the New York-listed healthcare giant said it had conducted a thorough strategic review but would now keep control of the “successful” Nottingham-based company.
“WBA has been encouraged by productive discussions held with a range of parties, receiving significant interest from prospective buyers.
“However, since launching the process, the global financial markets have suffered unexpected and dramatic change.
“As a result of market instability severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots and No7 Beauty Company.
“Consequently, WBA has decided that it is in the best interests of shareholders to keep focusing on the further growth and profitability of the two businesses.”
The decision will cast doubt over the long-term strategy of a stalwart of the UK high street, which had been identified as non-core to its American parent’s future.
On Tuesday, WBA insisted it was committed to investing in Boots’ future, although it signalled that it was open-minded about reviving a sale or other form of corporate activity in future.
The £5.5bn auction of Boots had faltered badly in recent weeks, with the only bidder to make a binding offer- a consortium of Apollo Global Management and Reliance Industries – pinning its hopes on the steadfastness of a quartet of lenders.
Apollo and Indian behemoth Reliance had lined up Royal Bank of Canada, Credit Suisse, Santander and Bank of America to help finance a large chunk of the £5bn-plus acquisition.
However, growing concerns about the global economy had triggered severe doubts among large banks which help finance leveraged buyouts, with Boots among the biggest such deals in Europe.
Because of the difficulty bidders were having financing a deal, WBA was prepared to retain a significant minority stake in Boots in order to get the deal through.
Another prospective bid from the owners of Asda – Mohsin and Zuber Issa and TDR Capital – had looked even more uncertain.
WBA, which has been advised by Goldman Sachs, had been in talks with bidders for months.
Among the other challenges facing prospective acquirers was finding an adequate solution for Boots’ £8bn pension scheme – one of the largest private retirement funds in the UK.
Sky News revealed earlier this year that an apparent early frontrunner in the Boots auction – a joint bid from Bain Capital and CVC Capital Partners – had decided not to proceed amid scepticism over the price tag of up to £6bn.
Rosalind Brewer, WBA chief executive, said: “We have now completed a thorough review of Boots and No7 Beauty Company, with the outcome reflecting rapidly evolving and challenging financial market conditions beyond our control.
“It is an exciting time for these businesses, which are uniquely positioned to continue to capture future opportunities presented by the growing healthcare and beauty markets.
“The board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximize shareholder value for these businesses and across our company.”
Like many retailers, Boots had a turbulent pandemic, announcing 4000 job cuts in 2020 as a consequence of a restructuring of its Nottingham head office and store management teams.
It has also been embroiled in rows with landlords about delayed rent payments.
Shortly before the pandemic, Boots earmarked about 200 of its UK stores for closure, a reflection of changing shopping habits.
Boots’ heritage dates back to John Boot opening a herbal remedies store in Nottingham in 1849.
It opened its 1000th UK store in 1933.
For Stefano Pessina, the WBA chairman, a decision to sell Boots outright would have marked the final chapter of his involvement with one of Britain’s best-known companies.
The Italian octogenarian engineered the merger of Boots and Alliance Unichem, a drug wholesaler, in 2006, with the buyout firm KKR acquiring the combined group in an £11bn deal the following year.
In 2012, Walgreens acquired a 45% stake in Alliance Boots, completing its buyout of the business two years later.