Boots merger ' to lead to dividend cut'

Around 100,000 Boots shareholders will have to stomach a dividend cut as part of life with merger partner Alliance UniChem, it was reported today.

The Sunday Telegraph said a prospectus published ahead of the tie-up will highlight a new dividend policy – and what is thought will lead to the first cut or shareholders since Boots rejoined the stock market in 1951.

Boots offered 30.1p a share this year, but it is understood the figure could be reduced to around 20p in order to reflect the lower dividend yield of Alliance, which is seen as a growth stock. In contrast Boots has offered shareholders steady income from being a more mature company.

A source told the newspaper that while shareholders will have to give up some of the dividend they will benefit from the stronger growth prospects of the combined company, as well as a “progressive” dividend policy.

Votes by both sets of shareholders are due to take place at extraordinary meetings in mid-July with the merger due to be effective on July 31. The proposal has already received the backing of regulators, who have asked for 95 outlets to be sold in order to increase competition in certain areas.

Nottingham-based Boots recently paid a special dividend following the £1.9 billion sale of its Strepsils-to-Nurofen business to Reckitt Benckiser last year. It also plans to pay its shareholders a dividend to cover the period between April and the merger at the end of July.

The new company – to be called Alliance Boots – will become the largest drugs retailer and wholesaler in the UK as well as have a network across 10 other European countries. It will have around 2,600 stores in the UK.