Walgreens abandons Boots sale amid volatile debt market
Boots has 89 outlets in Ireland employing more than 2,000 people.
US retail giant Walgreens is abandoning the sale of the Boots pharmacy chain in the UK and Ireland citing āunexpected and dramatic changeā in the global financial markets since launching the sales process in January.
The American healthcare group had been in talks with a consortium between Reliance Industries and Apollo Global Management over the more than ā¬5.8bn sale of the chain.
Boots has 89 outlets in Ireland employing more than 2,000 people
As a result of āmarket instability severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots,ā Walgreens said in a statement. The recent strong performance of Boots, and its key No7 beauty brand, is also behind the decision to retain the business, the company added in the statement.
The Boots sale was considered a litmus test for dealmaking with credit markets becoming increasingly fragile. The easy financing conditions that supported a series of debt-fueled takeovers of British companies last year have mostly come to an end.Ā
Banks have been cutting their exposure to leveraged loans for risk of being saddled with debt they canāt then sell on to investors. Thatās cast a shadow over at least $25bn (ā¬23.75bn) of transactions in Europe.
This year, banks have run into problems offloading Ā£6.6bn (ā¬7.66bn) of debt tied to Clayton Dubilier & Riceās take-private of UK supermarket chain Wm Morrison Supermarkets.Ā
The focus is now on how the financing will come together for deals including the possible Ā£5bn (ā¬5.8bn) sale of UK gas station operator Motor Fuel Group.Ā
Meanwhile, Reckitt Benckiser Group has been struggling to attract bidders for its $7bn (ā¬6.65bn) infant nutrition unit.
The Reliance-led consortium had been the frontrunner to buy Boots although the amount they offered was still short of the valuation of about Ā£7bn (ā¬8.12bn) that Walgreens had been seeking initially.Ā
Its main competitor in the bidding was a consortium of Britainās 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 sprawling web of more than 2,000 stores in the UK and many of them need to be renovated and adapted to changing consumer trends. Boots has also been slow to catch up with online shopping, just one of the areas where investment is needed.Ā
There are also billions in pension guarantees that would have to be taken on.
āThe board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximise shareholder value for these businesses and across our company,ā said Walgreens Chief Executive Officer, Rosalind Brewer.
