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Boots owner Walgreen Boots Alliance is in talks over a sale to a private equity firm, in a move that could trigger a fresh auction of the British retailer.
Walgreens is reportedly in discussions with Sycamore Partners over a deal that could value the US company at around $10bn. Its stock rose almost 20% on Tuesday after The Wall Street Journal first reported the negotiations.
It follows a dramatic decline in Walgreens’ share price which peaked at over $100bn in 2015. In 2019, the company was offered $70bn to sell to private equity firm KKR in what would have been the largest private equity deal on record.
Walgreens operates about 2,000 Boots pharmacies in the UK but has been looking to offload the British chain for several years.
Stefano Pessina, Wallgreens’ Italian chairman and its largest shareholder, is expected to play a key role in carving out Boots and could end up as its new majority owner, Sky News reported.
Last December, the company explored options for selling off the UK pharmacy chain, including the possibility of a flotation on the London Stock Exchange. It was looking to value the business at around £7bn, according to Bloomberg.
It cancelled these plans in June saying: “While we believe there is significant interest in this business at the right time, Boots’ growth, strategic strength and cashflow remain key contributors to Walgreens Boots Alliance.”
Boots is one of Walgreens best performing assets with retail sales up 6.2% in its latest quarterly results, the 14th consecutive quarter of market share growth.
Walgreens first acquired a 45% stake in Alliance Boots in 2012, completing its buyout of the business two years later.
Sycamore has a track-record of investing in struggling brick-and-mortar retailers including a $7bn deal for Staples in 2017.
Morning update:
Pall Mall and Lucky Strike owner British American Tobacco has confirmed it will deliver full-year results in line with guidance after second half growth met expectations.
It is a further sign the cigarette manufacturer’s shift to smokeless products is yielding results with the full-year results due in February.
“We continue to make progress towards our ambition of becoming a predominantly smokeless business by 2035,” said CEO Tadeu Marroco.
However, US volumes fell 9% “reflecting continued macro-economic pressures and the impact of illicit single-use vapour products”
The company is targeting mid-term revenue growth mid-term of 3-5% and mid-single digit adjusted profit from operations growth by 2026.
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