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Last Updated: Tuesday, 24 April 2007, 17:48 GMT 18:48 UK
This Boots was made for stalking
By Simon Atkinson
Business Reporter, BBC News

A Boots pharmacy
Terra Firma's withdrawal has left the way clear for the KKR bid

So that looks like it.

About 150 years after it was founded, one of the UK High Street's most famous names is set to be sold to US financiers.

As rival suitor Terra Firma withdraws its interest, a consortium led by private equity firm Kohlberg Kravis Roberts (KKR) looks certain to buy Alliance Boots in a deal worth 11.1bn ($22.2bn).

Having seen the value of their investment rocket almost 40% in the past month and a half, shareholders are virtually certain to back the deal, which is supported by the board.

It will be the UK's single largest private equity takeover - and make Alliance Boots the first company to fall into private hands while listed on London's FTSE 100 index.

Impact on shoppers?

But while the deal is breaking records in the City, there are plenty of questions emerging on the High Street and the shop floor.

So what was that about private equity's new commitment to communicate better and become more transparent in their activities?
Robert Peston
BBC Business Editor

What, for example, will the deal mean for Alliance Boots' approximately 100,000 staff?

As well as worries about job cuts, its pension trustees and KKR will have to hammer out a deal over payments into the group's 3bn pension fund - reported to have a deficit approaching 200m.

Then there are the 125,000 pharmacies, health centres and hospitals to which the company is a wholesaler.

Will the NHS and others it supplies be affected?

Man putting up Alliance Boots sign
Alliance UniChem and Boots only merged last year

And of course there are the customers who pop into the 2,600 Boots stores in the UK for their sandwiches, sunscreen and anti-dandruff shampoo - not to mention shoppers at its 400 overseas outlets.

The consortium has already been criticised by some for failing to be open about what its plans are for Boots.

They include BBC business editor Robert Peston who "took it for granted" that the consortium would "want to allay the legitimate fears of Alliance Boots' many employees and customers and explain that their ambitions are actually to grow the company, rather than slash and burn it for a quick buck".

Private equity worries

No-one at KKR, which has racked up 29.3% of Alliance Boots' shares, is giving interviews.

Indeed getting the business away from the intense scrutiny of the stock market - from multiple shareholders to the media - is thought to be one of the key attractions of the deal to Stefan Pessina.

The Secretary of State must act now and call in the private equity bidders to explain how the numbers add up
Paul Maloney, GMB union

Boots' Monaco-based billionaire deputy chairman, who is partnering with KKR in the deal, is believed to now own at least a 25% stake in the firm.

He helped build the Alliance UniChem empire, which merged with Boots in a 7bn tie-up last July.

Given the aftermath of other UK private equity deals - the AA and Birds Eye sacked thousands of workers after being bought while Debenhams has struggled since its return to the stock market - criticism of the takeover was predictable.

There are fears the winning bidder will strip the firm of its assets, effectively selling off property, cutting back staff and burdening it with cheap debt.

Person holding Boots bag walking past Alliance UniChem van
The firm is a major supplier to the NHS

The GMB union has written to Health Secretary Patricia Hewitt saying that its members are worried that a takeover would lead to hundreds of branches closing.

With KKR now set to pay 1bn more than it first offered, this must "put even more pharmacies at risk," says its national officer Paul Maloney,

He has called on the Secretary of State to act and "call in the private equity bidders to explain how the numbers add up".

Growth plans

In a statement to the BBC, KKR insisted that asset stripping was not on its agenda.

"The important thing for customers, suppliers, employees and the unions to realise about our proposal is that firstly, our investment rationale is all about growth," it said.

If we own the business, we will employ more people in the future than we do today
Kohlberg Kravis Roberts

"We plan to grow the business and the brand and make the company a global leader.

"This by implication means that in the years to come if we own the business, we will employ more people in the future than we do today and the business will have received significant investments in order to meet the opportunity that we see in a dynamic changing pharmacy healthcare and beauty marketplace."

The bidding war means KKR will be paying a little more than it perhaps wanted to hand over, analysts say.

Now all eyes are on how it plans to run the business and claw it all back.




SEE ALSO
Terra Firma drops Boots bid plan
24 Apr 07 |  Business
Bidding war breaks out for Boots
20 Apr 07 |  Business
Boots bid 'unsettling' for staff
20 Apr 07 |  Nottinghamshire
Bidding battle expected for Boots
09 Apr 07 |  Business
German firm silent on 'Boots bid'
02 Apr 07 |  Business
Boots gets improved bid approach
30 Mar 07 |  Business
Boots rejects 9.7bn bid approach
12 Mar 07 |  Business

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