Reliance in talks to raise up to $8 bn for Boots acquisition
Conglomerate explores leveraged buyout of British pharma chain
MUMBAI: Reliance Industries Ltd (RIL) is in talks with a clutch of global banks to raise $8 billion for its planned leveraged buyout of British pharma chain Boots, two people aware of the discussions said.
The conglomerate, led by billionaire Mukesh Ambani, is in talks with a consortium of foreign lenders comprising Barclays Bank Plc, Deutsche Bank AG, HSBC and Standard Chartered Bank for its biggest crossborder acquisition plan, the people cited above said on the condition of anonymity.
On June 9, Mint reported that a consortium of RIL and buyout firm Apollo Global Management Inc. emerged as a top contender to acquire Walgreens Boots Alliance Inc.’s Boots pharmacies unit in the UK, with an offer valuing the latter’s assets at $7-8 billion.
“The board of Walgreens Boots Alliance is likely to meet in the next few days with an agenda to discuss the potential deal with the Ril-apollo Global consortium. Following that, the RIL board will meet to approve the proposed takeover,” one of the two people said.
After the acquisition, Reliance plans to integrate Boots assets with Reliance Retail Ltd and bring the combined entity under Reliance Retail Ventures Ltd (RRVL).
“Since RRVL and Walgreens
Boots have steady cash flows, along with a large franchise across Europe, several global banks have stepped in for financing,” the second person said, adding that Reliance may later refinance the loan. An RIL spokesperson declined to comment on the story, while queries emailed to Walgreens, Barclays, Deutsche Bank, Standard Chartered and HSBC remained unanswered until press time.
According to the people cited above, the Ril-apollo offer is significantly above competing bids, which are in the range of $5-6 billion. Walgreens put its Boots business on the block in December, seeking a valuation of $8.8 billion. The US drugstore chain also runs more than 2,200 Boots health and beauty stores across the UK, with around 85% of the population estimated to be within 10 minutes of a Boots store.
In the third quarter of fiscal 2021, RRVL raised ₹47,265 crore by selling a 10.09% stake. It recorded consolidated revenue of ₹1.99 lakh crore for FY22, an increase of 26.7% from a year earlier, while net profit rose 28.7% to ₹7,055 crore. The company reported its highest ever Ebitda at over ₹12,000 crore.
According to analysts, the Boots acquisition will expand RIL’S operations in Europe, give it economies of scale, and open a lucrative business gateway to MENA (the Middle East and North Africa) markets.
The deal will also substantially expand RIL’S presence in healthcare if it goes through. In 2020, the company acquired a 60% stake in Chennai-based online pharmacy startup Netmeds for ₹620 crore.
RIL has also made a series of acquisitions in healthcare and pharma. These include the purchase of majority stakes in digital healthcare platform Karexpert and pharma software company C-square. In addition, RIL is integrating its brick-and-mortar network to offer a bouquet of services that can be monetized through transaction-based services, delivery and subscriptions.
According to reports, British billionaire brothers Mohsin and Zuber Issa, co-founders of Euro Garages (the owner of a chain of fuel stations), and the majority stakeholders in supermarket group Asda (held through a consortium with TDR Capital) were also competing for the deal but have since withdrawn from the race.
Over the past year, RIL has been on an acquisition spree to strengthen its foothold across sectors and markets. Last year, it narrowly lost out to a consortium of private equity investors Apax Partners LLC and Warburg Pincus LLC for a controlling stake in T-mobile Netherlands BV, the country’s largest telecom operator. The buyout firms acquired the Dutch telco for €5.1 billion ($6 billion) from Deutsche Telekom AG.