Private Equity Firms Bain and CVC Collaborate in Possible Bid to Show Boots | shoes

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Two of the world’s largest private equity firms are teaming up to bid for Boots, which its owner in the United States is expected to sell this year for an estimated £10 billion.

US group Bain Capital, which recently bought bakery chain Gail’s and made a doomed bid for British insurer LV = last year, is understood to have teamed up with UK-based CVC Capital. One-time owner of failed department store chain Debenhams, CVC now owns Moto and RAC service station group and luxury watchmaker Breitling.

Walgreens Boots Alliance (WBA), the US health group that has held a stake in the UK’s dominant pharmacy chain since 2012, is studying a potential sale this year. Estimates on the price range from £5 billion to £12 billion.

Any offer that includes CVC and Bain will likely mean a key role for Dominic Murphy, CVC’s managing partner who is currently on the WBA board. It is likely that Murphy will have to step down from board discussions about the sale.

His association with Boots dates back to 2007, when he teamed up with Italian billionaire Stefano Pesina for a pharmacist privacy. Subsequently, Murphy worked for private equity group KKR, and helped negotiate the £11 billion acquisition of Alliance Boots, which was formed through the merger of Pessina’s Alliance Unichem and Boots just the previous year.

Then the couple made a larger merger with the WBA, in which Pessina is currently the chairman of the board.

KKR held a stake in Boots until 2016, and in 2019 the company reached out to Walgreens about buying the entire collection, but no deal was agreed upon.

Bain is believed to be interested in developing online beauty and healthcare services from Boots, according to Sky News, which first reported the CVC’s potential association with the US private equity group.

Other large private equity firms are expected to consider leaning into Boots, including Apollo Global Management and Majestic Wine’s largest owner, Fortress Investment Group, who missed out on buying Britain’s Morrisons supermarket last year. Apollo also tried to buy Asda in 2020.

UK retail assets are seen as ripe for private equity investment as the lack of certainty about winners and losers in the rapidly changing consumer environment is driving owners to sell or seek new money.

The WBA statement said: “We can confirm that Walgreens Boots Alliance … has announced a strategic review primarily focused on our successful Boots business.

“This strategic review is in an exploratory stage and further announcements will be made in due course.”

No auctions are expected to begin until the summer.

However, the company previously said in a statement that Walgreens had a “renewed set of priorities and strategic direction for the group” that included a “more specific focus on North America and healthcare.”

A Nottingham retailer and drugstore, which has more than 2,000 outlets and employs about 55,000 people, may be listed on the Stock Exchange as an alternative to private selling.

Boots has had a rough time in recent years as it struggled to deal with a huge selection of vintage stores and struggles to take its brands around the world even before the pandemic.

In 2017, the WBA sold its shoe manufacturing business to France’s specialist company Variva, including the Nottingham factory that opened in the 1930s. In 2019, Boots said it would close up to 200 stores over two years.

While the group, as a primary retailer, has been able to trade during recent major street closures, its stores have suffered from low visitor numbers while nearby businesses remain closed.

Trading has rebounded in the past year, with sales at its existing pharmacy counters up nearly 9% in the three months to November 30, while sales across the rest of its product ranges are up more than 16%. Online sales nearly doubled at pre-pandemic levels to 15% of the total.

Founded by Quaker John Boot in 1849, Boots has been privately owned since 2007, a year after its collaboration with Alliance Unichem, to hand control over to Pessina.

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