Boots pension trustees hold the key to auction

THE multibillion-pound battle to buy Boots could depend on promises made around the retailer’s huge pension fund, as bidding reaches a climax.

Petrol forecourt tycoons the Issa brothers will face off against Wall Street investment giant Apollo to buy the pharmacy chain in a repeat of an auction for Asda nearly two years ago.

Sources close to the bidders suggested that a third bidder, US fund Sycamore Partners, had bowed out of the running. Boots’ advisers, however, are understood to be insisting that “more than two parties” remain involved.

Suitors have been asked to lodge final bids next week, with pension trustees likely to play “kingmaker”. A deadline of May 16 had been set, but suitors have been given more time to complete due diligence, Bloomberg reported.

The £7bn retirement fund ranks among the UK’S biggest. Although well-funded, trustees are alive to the impact of suitors’ plans to inject billions of pounds of debt into Boots as part of a takeover. “This isn’t just about putting a big number on the table,” said one senior City source. “The pension situation is a big thing.”

The Issas, with perennial private equity backers TDR Capital in tow, are believed to be exploring plans to pledge assets such as supermarket or petrol forecourt freeholds to the trustees. Apollo is bid- ding with Mukesh Ambani, India’s second-richest man, after missing out on Asda and again on Morrisons last year.

The sale is being run by Goldman Sachs. Formal discussions with pension trustees are only likely after a winning bid has been chosen.

Stefano Pessina, the 80-year-old who masterminded the sale of the business to US giant Walgreens, remains as chairman. His wishes are also likely to be pivotal, sources close to the sale added. Walgreens has offered to retain a stake of up to 30pc of Boots to make a deal more attractive.

Meanwhile, talks are understood to have stalled between the Issas and Quebec-based convenience store operator Couche-tard over the £13bn sale of forecourt empire EG Group. “They are far enough apart [on price] that it is too difficult at the moment,” the source added.

All parties declined to comment.