Indian conglomerate Reliance Industries and US buyout firm Apollo Global Management are claimed to be planning a joint bid for Boots.
Reliance is controlled by Mukesh Ambani, India’s second-richest man. Reports earlier this month said his company was in the early stages of exploring an offer for the British health & beauty chain, which is being sold by Walgreens Boots Alliance (WBA) so it can focus on the lucrative US healthcare market.
However, according to sources quoted by the Financial Times, Reliance is now working with Apollo on a bid that could result in the Boots brand being expanded into India, south-east Asia and the Middle East.
The report noted that both groups would own equity stakes in Boots under the plan, although it is not clear whether their stakes would be the same size.
Oil-to-telecoms conglomerate Reliance has made several overseas acquisitions, including British toy store Hamleys. Ambani is currently trying to shift its focus toward businesses that will help it tap India’s billion-plus consumers, with the group already operating more than 12,000 retail stores in the country.
However, analysts note that Reliance has yet to build a significant presence in the pharmacy and wellness sector – and that this is what it plans to achieve through a tie-up with Boots. India has recently seen a rise in online pharmacy retailers and a stake in Boots could enable Reliance to fast-track its entry into the market.
Earlier this week, it was revealed that WBA had set a 16 May deadline for final bids for the Boots chain amid concerns that the economic headwinds and turmoil in the financial markets caused by the war in Ukraine could depress its valuation.
The deadline is expected to see fewer than a handful of bids tabled, with the owners of Asda, the Issa brothers and private equity group TDR Capital, amongst the front runners.
Last week, Sebastian James, Managing Director of Boots UK & Ireland, played down fears that the sale process was stalling. In an interview with the BBC, he said: “There’s certainly a lot of interest [from potential bidders].”
WBA is believed to have valued Boots at as much as £7bn, although recent reports have suggested that bids could be much lower than hoped. It is thought that WBA would be willing to retain an up to 30% stake in Boots, as well as a seat on the board, if the rising cost of borrowing made a full debt-financed takeover difficult for a single firm.
Ornella Barra, Chief Operating Officer of WBA, also recently revealed that floating Boots as a standalone business remains an option if private equity firms do not put forward a suitable offer.
NAM Implications:
- Given its heritage, iconic retailer Boots will have pulling power in India, south-east Asia and the Middle East.
- Teaming up with Apollo will help Reliance access financing for the bid.
- The presence of private equity should focus stakeholders on financial output.
- Meanwhile, the economic headwinds and turmoil in the financial markets caused by the war in Ukraine remain…
- …and will affect the negotiation of the deal.
- Everything now depends on the price, as always…
