Private equity ready to melt as Walgreens considers boot sale

Two of the world’s largest buyout firms, Bain Capital

BCSF
and CVC Capital Partners, are said to be lining up a multibillion dollar acquisition of Boots, the UK’s largest drugstore chain.

Currently part of the US-UK mega-group Walgreens Boots Alliance (WBA), a Boots auction looks increasingly likely this spring, which would represent one of the largest retail deals in the UK For years.

The U.S. owner of Boots received an offer to take over Bain Capital more than two months ago, prompting the UK department store chain to consider a sale, according to The temperature.

It is understood that Bain has positioned itself as a leader in any upcoming auction for Boots after performing months of due diligence on the health and beauty giant and today on the broadcast channel. Sky News reported that Bain Capital and CVC Capital Partners are preparing to launch a joint offering for the retail giant.

Boots operates in over 2,000 stores and employs over 50,000 people.

Neither was available to comment on the Sky News story and a number of other private equity firms have been alerted to the chain’s possible sale in a process managed by Goldman Sachs

SG
. There is likely to be strong interest after WBA reported strong trade numbers at Boots last week, although during the trade announcement the company made no comment on the decision to explore a market. sale.

While Bain and CVC are expected to work on a plan to acquire Boots, involving substantial investments in its digital, beauty and healthcare services, there is also a possibility that the company will still be part of WBA, while transforming the chain into a separately listed company. business is another option.

However, a divestiture is seen increasingly likely because Walgreens is once again focusing on its domestic US market and reshaping the business after the pandemic.

Private Equity Targets Boots

A successful Bain and CVC bid is also attractive because of the potentially pivotal role Dominic Murphy, a member of CVC’s managing partners team and architect of the initial Alliance Boots buyout for $ 15 billion, will potentially play. of dollars by private equity firm KKR.

KKR
, for whom he previously worked in 2007.

Murphy remains a director of WBA and, as such, he should apologize for any debate within the board over a potential deal due to any possible conflict of interest in the process. However, Murphy’s vast understanding of the Boots business and Bain’s lengthy planning appear to leave their joint bid in a voting position.

Boots is headed by Sebastian James, the well-known and exuberant former CEO of Dixons Carphone, who consolidated Boots’ bulky store base and revamped many of its stores, while strengthening its online business and rolling out a dedicated offering. to beauty.

In its results for the WBA update last week, Boots revealed that comparable retail sales jumped 16.3%, recovering from the blow of last year when its department stores and Travel locations have been hit by the closures, while many shoppers have returned to supermarkets for their health and beauty. purchases.

While the group admitted that footfall to its stores remained below pre-Covid levels, its online sales nearly doubled pre-pandemic levels.

After closing hundreds of underperforming stores, Boots has invested heavily to make its remaining sites more attractive and to fight a host of online rivals in the health and beauty industry, including Amazon. Boots also opened 27 new beauty salons across the UK during the period.

Boots same-store drugstore sales grew 8.8%, driven by demand for its healthcare services which grew significantly both in-store and online. The company also delivered two million flu shots over the period, up 150% from last year.

Boots said her performance at Christmas was “good” thanks in part to increased sales of perfumes and beauty products.

Boots to the WBA

Boots spent around 15 years in alliances, first through the merger of Boots and drug wholesaler Alliance Unichem in 2006, followed a year later by buyout company KKR which acquired the combined group in the part of a $ 15 billion deal.

In 2012, US pharmacy giant Walgreens acquired a 45% stake in conglomerate Alliance Boots, completing its takeover of the company two years later and creating global giant WBA.

Boots is one of the UK’s best-known retailers and the chain’s heritage dates back to founder John Boot, who opened a herbal remedy store in the East Midlands town of Nottingham, UK Uni, in 1849.

With a network of around 2,200 stores, the sale of Boots is said to be one of the largest transactions involving a UK Main Street operator for many years. However, that would likely attract government scrutiny given the retailer’s nationwide stance in providing public health care services.

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