Reliance Industries and Apollo Global Management in £5bn bid for Boots | Boots

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Indian billionaire Mukesh Ambani’s Reliance Industries has teamed up with US private equity fund Apollo Global Management to launch a £5bn bid for UK chain Boots.

The American group Walgreens, which has controlled the pharmacy and the distribution of beauty products since 2012, is expected to retain a minority stake under the agreement.

The continued interest from Walgreens comes after concerns over funding the more than £7billion pension fund of Boots, one of the UK’s largest private schemes, for which the US group is believed to be underwriting guarantees worth billions of pounds. The directors would have liked substantial additional funding from potential bidders.

A takeover led by Reliance Industries, which already owns Hamleys toy store and is one of India’s largest retail groups, is expected to lead to expansion in Asia, according to Bloomberg, which first published the offer.

Ambani, who is one of India’s richest people with a fortune of over $100bn (£79.7bn) according to Forbes, is chairman of Reliance Industries, the group founded by his father which has interests in petrochemicals, oil and gas, telecommunications and retail.

The Ambani family lives in the 27-storey Antilla Tower in Mumbai, which was the most expensive house ever built in India.

Reliance is one of India’s largest brick-and-mortar retailers, through the Fresh and Smart convenience store chains, and has built an online portfolio to complement its leading telecommunications position under the Jia brand.

In the UK, the group bought toy retailer Hamleys for £70m in 2019 and last year spent £57m on the 120-hectare (300-acre) estate of Stoke Park in Buckinghamshire , which includes a 27-hole championship golf course and country club. which is being refurbished.

Apollo has long been interested in the UK retail market, having been interested in Marks & Spencer and supermarket chain Morrisons. He lost Asda to billionaire brothers Issa in 2020, lent money to former Topshop boss Philip Green as he tried to save his retail empire and previously owned jewelry retailer Watches of Switzerland. It also backs fund Alteri, which bought online fashion retailer Missguided shortly before it took office last month and bought Bensons for Beds in 2020.

Apollo is also a leading retail investor globally, owning the Casino supermarket chain in France and Albertsons in the United States.

It is unclear whether UK-based Issa brothers and their private equity partner TDR Capital, which recently bought Asda and owns a string of oil service stations, will launch a competing bid. Interest from the Issas is thought to have cooled in recent weeks as Asda battles a tough grocery market.

Two of the world’s largest private equity funds, CVC and Bain Capital, had considered bidding on Boots but reportedly backed off as they were unwilling to pay more than £4bn.

It is believed Walgreens initially wanted up to £10billion for Boots when it began weighing a sale last year, with the group saying it had a ‘renewed set of priorities and strategic focus’ , including “a sharper focus on North America and health care”.

Boots, which was founded by Quaker John Boot in 1849, has been in private hands since 2007, the year after it joined forces with Italian billionaire Stefano Pessina’s Alliance Unichem (now Alliance Healthcare).

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The Nottingham-based retailer and pharmacist, which has more than 2,000 outlets and employs around 55,000 people, has endured a difficult period in recent years as it has struggled to cope with an aging store portfolio as retail was moving online. In 2019 Boots announced that it would close up to 200 stores over two years.

Tony Shiret, retail analyst at Panmure Gordon, said Boots faced competition from supermarkets, discounters such as B&M and Savers and a host of new online rivals such as THG’s LookFantastic and Cult Beauty.

He said Boots had been given some breathing room following the demise of Debenhams and the closure of a host of other large stores which had put some of the high-end beauty market up for grabs.

But Shiret added: “Boots continues to be an incumbent in a market with many new entrants.”

While the group was considered an essential retailer and was therefore able to trade during the pandemic high street closures, its stores suffered from low footfall while neighboring businesses remained closed.

In 2017, WBA sold the bootmaking business to French specialist Fareva, including the Nottingham factory it had opened in the 1930s.

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