Boat bidders wrestle with right recipe for £8billion pension scheme | business news
Bidders at Boots, Britain’s largest high-street pharmacy, are wrestling with options to meet huge pension liabilities guaranteed by the chain’s current owner.
Sky News has learned that private equity firms that submitted indicative bids for Boots this week have been informed that the Walgreens Boots Alliance (WBA) has canceled the guarantees – which retail executives say are worth billions of pounds are – wants to give to a new owner.
At around £8bn, Boots’ pension scheme is one of the largest private pension funds in the UK.
Though it’s well-funded, private-equity insiders say Boots’ pension trustees are likely to seek significant additional funds as part of a leveraged buyout of the company.
A deadline for initial bids for Boots expired on Thursday, with at least three bidders understood to have submitted bids.
Among them are said to be the financiers who own Asda, US-based Sycamore Partners and a consortium of Bain Capital and CVC Capital Partners.
Sky News announced earlier this year that Bain and CVC had joined forces to bid for Boots, with the chain valued at between £5bn and £6bn by the WBA.
CVC’s involvement is significant as Dominic Murphy, one of the company’s managing partners and architect of KKR’s £11bn takeover of Alliance Boots – the private equity firm he previously worked for – played a key role in 2007 .
Mr. Murphy, who remains a director of Walgreens Boots Alliance, Boots’ US-listed parent company, is withdrawing from board discussions of the potential sale of Boots due to his interest in the CVC lawsuit.
Boots trades in over 2,000 shops and employs over 50,000 people, making it one of the largest employers in the UK private sector.
The sales process will be carried out by Goldman Sachs.
For Stefano Pessina, the WBA chairman, the decision to sell Boots would mark the final chapter in his involvement with one of Britain’s best-known companies.
The 80-year-old Italian engineered the merger of Boots and Alliance Unichem, a pharmaceutical wholesaler, in 2006, with buyout firm KKR acquiring the combined group for £11bn the following year.
In 2012, Walgreens acquired a 45% stake in Alliance Boots and completed the acquisition of the company two years later.
Mr. Pessina and his partner Ornella Barra, the group’s Chief Operating Officer for their international operations, have been the pillars of the company since the original Boots merger.
Like many retailers, Boots has been through a turbulent pandemic, Announcing 4,000 job cuts in 2020 as a result of a reorganization of Nottingham head office and store management teams.
It has also been involved in disputes with landlords over late rent payments.
Shortly before the Coronavirus Boots has slated about 200 of its UK stores to close in response to the crisis, reflecting changing shopping habits.
The chain’s heritage dates back to John Boot, who opened a herbal medicine shop in Nottingham in 1849.
It opened its 1000th store in Britain in 1933.
WBA and a spokesman for Boats Pension Administrators declined to comment.