KKR in £55bn bid for Boots owner

BOOTS’S owner has received a £55bn buyout proposal – a deal that if completed would be the largest ever debt-fuelled transaction.

US private equity business KKR has made a formal approach to buy Walgreens Boots Alliance – the High Street chemist’s parent company – and take it private, Bloomberg reported last night.

The sheer size of the company has made the prospect of a buyout seem fanciful, and the feasibility of the current proposal is not clear.

But unions have already said the prospect of the mega deal raised fears over the future of Boots’s 54,000 UK employees and 2,500 stores.

Walgreens, one of the 30 companies that make up the elite Dow Jones Industrial Average, is worth £44bn and has £13bn of debt. The largest leveraged buyout in history was in 2007 when Texas-based power company TXU was sold to KKR and TPG for £35bn.

It ended in bankruptcy seven years later after the firm collapsed under £31bn worth of debt, costing KKR £3.1bn in losses.

The Boots deal is reportedly being driven by the US giant’s billionaire chief executive Stefano Pessina, 78, who holds a 16pc stake.

The Italian, who worked with buyout house KKR in 2007 to take Alliance Boots private for £11.1bn, could be in for a £9.4bn payday if shareholders were bought out.

For the deal to go ahead, he would have to pull in more than £15bn of equity, Stephen

Schwarzman, the boss of Blackstone, said last week, describing the plans as a ‘stretch’.

Some analysts have questioned whether Walgreens could generate the quick returns that the private equity model requires.

Critics also say that going private will not solve the underlying problems in the business. The wider group has been forced to cut £1.4bn a year in costs by 2022 by closing stores and laying off staff.

Boots has already announced it will close 200 stores to help mitigate sliding sales and profits in both its retail and pharmacy businesses.

The High Street stalwart has suffered from increasing competition from supermarkets and online rivals. KKR declined to comment. Boots were contacted for comment.