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KKR raises Boots offer to £11.1bn Terra Firma drops Boots bid plan
(19 minutes later)
The takeover battle for Alliance Boots has hotted up after one of the chemist chain's main suitors raised its offer. A consortium led by private equity firm Terra Firma has decided to withdraw its interest in a takeover offer for Alliance Boots.
Private equity firm Kohlberg Kravis Roberts (KKR) and Boots' deputy boss Stefano Pessina have upped their bid for Boots to £11.1bn ($22.2bn). The move looks set to leave the way clear for private equity firm Kohlberg Kravis Roberts (KKR) and Boots' deputy boss Stefano Pessina to buy the firm.
The move comes after a rival group said on Friday that it was interested in buying the retailer for about £10.8bn and set up talks with Boots' board. On Monday evening, KKR upped its offer for the health and beauty retailer to £11.1bn ($22.2bn).
Whoever wins, it will be the UK's biggest private equity acquisition. If the deal goes ahead, it will be the UK's biggest private equity buyout.
Boots shares were little changed in London, trading 0.2% higher at 1,128.5 pence. The Terra Firma consortium - which also includes medical charity the Wellcome Trust and banking group HBOS - said it was "disappointed" not to be able to go ahead with its £10.8bn bid.
Head to head "However, we are pleased that the shareholders of Alliance Boots have received a significantly higher price due to our interest, and we wish the company and all its stakeholders well under new ownership," it said in a statement.
Boots' board of directors has already backed the takeover offer from KKR and Mr Pessina, who owns 15% of Boots, and analysts say that they are favourites to win control of the firm. News of the decision came after the group held a meeting with the Boots board.
Board support
Boots' board of directors has already backed the takeover offer from KKR and Mr Pessina, who owns 15% of Boots.
Market observers have estimated that KKR and Mr Pessina now own at least 25% of Boots shares, and may have as much as 28%.Market observers have estimated that KKR and Mr Pessina now own at least 25% of Boots shares, and may have as much as 28%.
The rival consortium consists of private equity firm Terra Firma, which was founded by UK investor Guy Hands, medical charity the Wellcome Trust, and banking group HBOS. One of the UK's oldest retailers is set to be owned by the American founder of the modern private-equity industry BBC business editor Robert Peston class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/04/boots_knockout_1.html">Robert Peston on Boots battle class="" href="http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/shares/3/37894/intraday.stm">Alliance Boots' share price
One of the UK's oldest retailers is set to be owned by the American founder of the modern private-equity industry BBC business editor Robert Peston Peston on Boots battle Alliance Boots' share price
According to the Terra Firma group there was no guarantee that they would table a firm offer. The group is expected to meet with the Boots board of directors on Tuesday.
"Will Terra Firma come back?" analysts at Seymour Pierce asked in a note to clients.
"It looks to us less rather than more likely that this consortium will be in a position to raise its offer," they concluded.
KKR's new bid is worth 1,139 pence per share to Boots investors.KKR's new bid is worth 1,139 pence per share to Boots investors.
The private equity firm and Mr Pessina said that they tabled the offer after buying 49.7 million shares at the higher price.The private equity firm and Mr Pessina said that they tabled the offer after buying 49.7 million shares at the higher price.
"Overnight, KKR, in partnership with Mr Pessina, spent more than £1bn buying almost 10% of Alliance Boots's shares," said BBC business editor Robert Peston."Overnight, KKR, in partnership with Mr Pessina, spent more than £1bn buying almost 10% of Alliance Boots's shares," said BBC business editor Robert Peston.
"Their share raid has probably defeated the rival group of Terra Firma and the charity Wellcome Trust, which also wants to buy Alliance Boots. "It's history: Boots, one of the UK's oldest retailers, is set to be owned by the American founder of the modern private-equity industry, KKR," he added.
"It's history: Boots, one of the UK's oldest retailers, is set to be owned by the American founder of the modern private-equity industry, KKR," he said.
Broad reachBroad reach
KKR first made an approach in early March, but was turned down because the offer price was too low.KKR first made an approach in early March, but was turned down because the offer price was too low.
Alliance Boots is best known in the UK for its 2,600 Boots the Chemist shops, and it also has 400 overseas outlets in countries including Thailand and Italy.Alliance Boots is best known in the UK for its 2,600 Boots the Chemist shops, and it also has 400 overseas outlets in countries including Thailand and Italy.
As well as the High Street retail arm, the company is a wholesale supplier to more than 125,000 pharmacies, health centres and hospitals.As well as the High Street retail arm, the company is a wholesale supplier to more than 125,000 pharmacies, health centres and hospitals.
The Alliance business was built up from a family concern by Mr Pessina, and analysts speculate that he wants to win control of the group so he can delist it from the stock exchange and grow it away from intense stock market scrutiny. The company was formed last year through the merger of Boots and Alliance UniChem.
The Alliance UniChem business was built up from a family concern by Mr Pessina, and he is seen as wanting to win control of the group so he can delist its shares and grow the business away from intense stock market scrutiny.