Private equity firms Bain and CVC join forces for potential Boots bid

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UK’s biggest pharmacy chain expected to be put up for sale this year by US owner for an estimated £10bn

Last modified on Tue 11 Jan 2022 14.52 EST

Two of the world’s largest private equity firms are teaming up to bid for Boots, which is expected to be sold by its US owner this year for an estimated £10bn.

The US group Bain Capital, which recently bought the bakery chain Gail’s and made a doomed bid for the British insurer LV= last year, is understood to have teamed up with UK-based CVC Capital. A one-time owner of the failed department store chain Debenhams, CVC now owns the Moto service station group, the RAC and the luxury watchmaker Breitling.

Walgreens Boots Alliance (WBA), the US health group that has owned a stake in the UK’s dominant pharmacy chain since 2012, is considering a potential sale this year. Estimates on the price range from £5bn to £12bn.

Any bid involving CVC and Bain is likely to mean a key role for Dominic Murphy, the CVC managing partner who currently sits on the WBA board. Murphy is likely to have to recuse himself from board discussions about the sale.

His association with Boots dates back to 2007, when he teamed up with the Italian billionaire Stefano Pessina to take the chemist private. Then working for the private equity group KKR, Murphy helped negotiate an £11bn takeover of Alliance Boots, which had been formed by the merger of Pessina’s Alliance Unichem and Boots only the year before.

The pair then brought about the even bigger merger with WBA, where Pessina is currently chairman.

KKR retained a stake in Boots until 2016, and in 2019 the firm approached Walgreens about a buyout of the whole group, but a deal could not be agreed.

Bain is thought to be interested in developing Boots’s online beauty and healthcare services, according to Sky News, which first reported CVC’s potential tie-up with the US private equity group.

Other large private equity firms expected to consider a tilt at Boots include Apollo Global Management and Majestic Wine’s majority owner, Fortress Investment Group, which both missed out on the buyout of the British supermarket Morrisons last year. Apollo also attempted to buy Asda in 2020.

British retail assets are seen as ripe for private equity investment as lack of certainty about winners and losers in a fast-changing consumer environment is prompting owners to sell up or seek new funds.

WBA has said it will not comment on what it calls “market speculation” and that Boots is “an important part of the group”. Any auction process is not expected to kick off until summer.

However, the company previously said in a statement that Walgreens had “a renewed set of priorities and strategic direction for the group” that included “a more pointed focus on North America and on healthcare”.

A stock market listing for the Nottingham-based retailer and pharmacist, which has more than 2,000 outlets and employs about 55,000 people, may also be on the cards as an alternative to a private sale.

Boots has had a tough time in recent years as it has struggled to deal with a huge ageing store portfolio and difficulties in taking its brands worldwide even before the pandemic.

In 2017, WBA sold off the Boots manufacturing business to the France-based specialist Fareva, including the Nottingham factory that it opened in the 1930s. In 2019, Boots said it would close up to 200 stores over two years.

While the group, as an essential retailer, was able to trade during the recent high street lockdowns, its stores suffered from low visitor numbers while neighbouring businesses remained closed.

Trading bounced back last year, with sales at established pharmacy counters up almost 9% in the three months to 30 November, while sales across the rest of its product ranges rose more than 16%. Online sales have almost doubled on pre-pandemic levels to account for 15% of the total.

Boots, which was founded by the Quaker John Boot in 1849, has been in private hands since 2007, the year after it teamed up with Alliance Unichem, handing control to Pessina.

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