In January, Walgreens Boots Alliance Inc. has abandoned the sale of Boots Drugstore chain in the UK citing unexpected and dramatic change in the global financial markets.
The American health-care group had been in talks with a consortium of Reliance Industries Ltd. and Apollo Global Management Inc. over the more than 5 billion $6.1 billion sale of Britain's biggest pharmacy chain.
As a result of market instability, no third party has been able to make an offer that reflects the high potential value of Boots, Walgreens said in a statement Tuesday. The decision to retain the business is a result of the recent strong performance of Boots, and its key No 7 beauty brand, according to the company.
The Boots sale in the UK has become a litmus test for dealmaking in the UK, with credit markets becoming increasingly fragile. The easy financing conditions that supported a series of debt-financed takeovers of British companies last year have come to an end. Banks have been cutting their exposure to leveraged loans in order to protect themselves against the risk of being saddled with debt that they can't sell on to investors. That has cast a shadow over at least $25 billion of transactions in Europe.
This year banks have run into problems offloading 6.6 billion of debt tied to Clayton Dubilier Rice's take-private of UK supermarket chain Wm Morrison Supermarkets Plc. The funding will come together for deals including the possible 5 billion sale of UK gas station operator Motor Fuel Group Ltd. Reckitt Benckiser Group Plc has been struggling to get bids for its $7 billion infant nutrition unit.
The Reliance-led consortium had been the frontrunner to buy Boots, but the amount they offered was still short of the valuation of 7 billion that Walgreens had been looking for initially. Their main competitor was a consortium of Britain's billionaire Issa brothers and TDR Capital, although the race between the two lost steam as financing markets became weighed down by concerns around inflation and the war in Ukraine.
Boots has a vast web of more than 2,000 stores on the UK high streets, and many of them need to be renovated to keep pace with changing consumer trends. Boots has been slow to catch up with online shopping, one of the areas where investment is needed. There are billions of pension guarantees that would have to be taken on.
The board and I remain confident that Boots and No 7 Beauty Company hold strong fundamental value and that we will stay open to all opportunities in order to maximize shareholder value for these businesses and across our company," said Rosalind Brewer, CEO of Walgreens.
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