Company Vitae: Alliance Boots

US giant Walgreens recently acquired 45% of the UK's favourite chemist. Here's the due diligence on what it's getting for its $6.7bn.

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Last Updated: 13 Apr 2016

Formative years

John Boot opened his first store in Nottingham in 1849. Back then, medical treatment was as likely to kill as cure, so Boot specialised in traditional herbal remedies and homeopathy instead. Son Jesse Boot took over in 1860, building up the business as a manufacturing chemist. Boots was acquired by the United Drug Company of Boston, Massachusetts in 1920. But, 13 years later, Jesse's son John Boot bought it back again, and it remained British-owned for the next 74 years. In 1935 the famous No 7 cosmetics brand appeared. Boots prospered post war with the emergence of the NHS and the mass prescription of drugs, and even got involved in pharmaceutical research. In 1961, a team of chemists working for Boots discovered and patented the painkiller ibuprofen.

Recent history

In an attempt to keep growing in the 1990s, the company diversified, owning DIY chain Do It All and car spares outfit Halfords for a while. It later made similarly short-lived efforts to get into beauty treatment, homeopathy and laser eye surgery. In 2006 Alliance Unichem made its successful £12bn bid, then Britain's largest-ever LBO, which created a group operating in 21 countries. Last month, it was announced that Alliance Boots was going all American again, as Illinois-based giant Walgreens offered $6.7bn for a 45% stake in it, with an option to buy the remaining 55% for $9.5bn in 2015.

Who's the boss?

Alliance Boots chairman Stefano Passina, who with the Walgreens deal has doubled his £1bn stake (and those of co-investors including US private equity outfit KKR), despite predictions that Boots would drown under its £9bn debt. Meanwhile, across the pond, we have Walgreens, a convenience store empire twice the size of Boots, with 8,000 branches and annual sales of $72bn. Its share price dropped 6% on news of the deal. Has CEO Greg Wasson paid too much?

The secret formula?

Despite the fact that it famously struggles to get shoppers up the stairs in its many two-storey branches, Boots has weathered the high street storm better than many. Assuming the Walgreens merger completes in 2015, it will create the world's largest chemists' chain, with 11,000 stores and Boots products being sold in the US. But whose name will end up over the door?

Don't mention

Zug. Following the acquisition by Passina and KKR, Boots HQ was moved from its historic home of Nottingham to that well-known centre of high street chemist excellence, Zug in Switzerland. For tax reasons, naturally.

 

VITAL STATISTICS

Employees  6,000
Revenue pounds 23bn
Trading profit pounds

1.2bn




All figures for Alliance Boots only

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