Stefano Pessina, executive chairman of Alliance Boots, has agreed to sell 45% of the British retailer and pharmaceutical distributor to US pharmacy giant Walgreens for $6.5bn. The deal also gives Walgreens the option to buy the rest of Alliance Boots in three years. A full tie-up would unite the two biggest pharmacy groups on either side of the Atlantic and create Europe’s biggest pharmaceutical distributor. Messina and private equity group KKR took over Boots in a record European leveraged buyout in 2007.
What the commentators said
Debt-laden businesses bought in the bubble era have been toppling over like ninepins, said Ian King in The Times. But the Boots buyout has paid off. KKR is set to make 2.2 times its original outlay, while Boots is in good shape as Pessina proved to be “an excellent custodian of the business”. Revenues have grown by 60% and operating earnings by 45% over the past five years.
Boots now gains a presence in America, which accounts for around 40% of the global healthcare market, and a new distribution outlet for its brands. Walgreen investors, meanwhile, needed “a growth story”, said Jonathan Sibun in The Daily Telegraph. Boots offers “powerful medicine”: access to the profitable European and UK markets, a route into the emerging world, scant geographical crossover, and $1bn of potential annual synergies.
Given the new group’s buying power, the prescription drug procurement savings “could be substantial”, added Lex in the FT. Still, it won’t be all plain sailing. The retailers have different images, and transatlantic retail adventures have not always been happy. Whatever happens, though, “this will be one for the textbooks”.