Yahoo Finance American owner set to lose billions on Boots sale
The American owner of Boots risks losing billions after the one-time favourite to buy the chemist chain valued the retailer at a steep discount.
Buyout funds CVC and Bain indicated that they were willing to pay just £4bn for the business, according to City sources. The consortium bowed out of the running last month. A spokesman for Boots said that the pair did not lodge a formal offer.
Walgreens, the US retail giant, took control of Boots in 2014 in a deal worth £9bn. It has put a £7bn price tag on the UK chain after selling its wholesale arm last year.
The low valuation is significant because CVC’s UK head is Dominic Murphy, who sits on the board of Walgreens and has been involved with Boots for 15 years.
CVC and Bain were the early frontrunners after Walgreens hired Goldman Sachs to sell Boots at the end of last year. “He [Mr Murphy] knows where the bodies are buried,” said one City source.
The Issa brothers, Apollo Global Management and Sycamore Capital remain in the running to buy Boots, which has more than 2,000 stores and employs 50,000 people.
Apollo is believed to be working with investment bankers from RBC Capital, which previously advised CVC and Bain. The Issas, along with perennial private equity partners TDR Capital are understood to have retained investment bankers from Rothschild.
Boots is run by Sebastian James in the UK and Ireland. At the end of last month it announced retail sales had risen by 22pc. Mr James hailed Boots’ “rejuvenated store portfolio and increasingly powerful online presence”.
Last week it was reported that Walgreens had offered to retain a stake of up to 30pc in Boots amid concerns about the rising cost of borrowing the billions of pounds needed to finance a takeover.
Ornella Barra, the head of Walgreens’ international business and partner of the US firm’s executive chairman Stefano Pessina, will take a seat on the Boots board if a stake of between 15pc and 30pc is retained.
Boots declined to comment further.
