In an interesting development and intensifying bid battle Guy Hands’s Terra Firma Capital Partners Ltd. has decided to raise its bid for Alliance Boots Plc, the UK’s largest drugstore chain, to about 10.9 billion pounds or $21.8 billion to topple a takeover offer from Kohlberg Kravis Roberts & Co. However, the board of Alliance Boots had already recommended a £10.6 billion takeover offer from its deputy chairman Stefano Pessina and Kohlberg Kravis Roberts (KKR), the private equity firm.
Alliance Boots, Britain’s biggest pharmacy chain, has said that it is agreed to a 10.6 billion pound or $21.2 billion offer from a private equity firm and billionaire Stefano Pessina after they raised their bid by 5 percent. The offer under consideration is Europe’s biggest leveraged buyout and Europe’s largest private equity deal ever.
KKR and Pessina, biggest shareholder of Alliance Boots, said that they would pay 1,090 pence, or $22, a share in cash, up from their previous offer of 1,040 pence. The total offer is corresponding to $21.2 billion. Alliance Boots, which had earlier rejected an offer of £10 a share from KKR last month, was formed last year in a merger of Boots, a 150-year-old health and beauty retailer, and the drug wholesaler Alliance UniChem.
Apart from its chain of pharmacies, the company has a wholesale unit supplying drugs to more than 125,000 pharmacies and hospitals. It has recently worked out a target to cut costs by £100 million a year by 2010.
KKR and Stefano Pessina believe that the rapid structural changes in the pharmacy retail and wholesale markets in Europe would necessitate an acceleration of Alliance Boots’ transition to a pharmacy-led health and beauty and services-oriented business.
In the meanwhile, union leaders have said that the takeover battle for Alliance Boots by private equity firms is anxious and unsettling. The union Usdaw has raised concern that workers were worried about how the bids would affect long-term job security and pensions. Usdaw general secretary John Hannett has disclosed that he has written to senior Boots’ directors ’seeking an urgent meeting to clarify what a successful bid might mean for Usdaw members’.
