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Last Updated: Monday, 12 March 2007, 19:03 GMT
Boots rejects 9.7bn bid approach
Man putting up Alliance Boots sign
The Boots board will encourage a bidding war, analysts suggest.
Alliance Boots bosses have rejected a proposed 9.7bn ($18.7bn) offer from a private equity group, saying the suggested price was too low.

US-based KKR had indicated a possible offer of 10 per share, but Boots said this did not reflect the value of the UK chemist and drugs wholesaler.

The "friendly approach" had the backing of Italian billionaire Stephano Pessina - who controls a 15% stake in Boots.

Boots' shares have surged since talk of a bid emerged on Friday.

By close of trade on the London Stock Exchange, shares in the healthcare group were 66.5 pence, or 7.15%, higher at 996.5p.

They would look pretty foolish if they simply walked away
Robert Peston
BBC business editor

The board said that the offer did not reflect "the fundamental value of the company or the attractive prospects, opportunities and synergies available".

Bidding war?

BBC business editor Robert Peston said that the rejection was expected.

"The ball is firmly back in the court of KKR and Pessina," he said.

"They would look pretty foolish if they simply walked away, so I would therefore expect that when they search down the back of their sofa, they will find that they actually have a few hundred million pounds more they could spend on buying Alliance Boots."

Trade unions have warned that selling the group to a private equity firm could lead to "asset-stripping".

"Boots is in for the same punishment that other companies have had - asset stripping, looking at property portfolios, flogging them off and running away with bags of cash," said senior GMB organiser Paul Maloney.

Nottingham-based Alliance Boots is best known in the UK for its 2,600 Boots the Chemist shops on the High Street.

But since its 7bn tie-up with Alliance UniChem last year it is now also a major drugs wholesaler, with a 40% market share, supplying more than 125,000 pharmacies, health centres and hospitals.

BBC business editor Robert Peston said that the fact that one of Boots' key investors was working with KKR on the offer "massively increased the likelihood" of it going through.

Other analysts agreed - with many predicting the Alliance Boots board would be keen on other potential buyers coming forward, leading to a bidding war for the company.

KKR is the world's biggest private equity firm and was recently part of a consortium involved in the $45bn (22.9bn) buyout of US utility TXU Energy - the world's biggest private equity deal.

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