Mumbai mogul could be a tonic for sickly Boots

Stronger business links with India can carry risks but the benefits in this bid by billionaire Mukesh Ambani outweigh them

I‘Reliance has both the nous and the financial firepower to inject some muchneeded pizazz back into Boots’

t’s easy to lament the prospect of Boots changing hands again when the line-up of potential buyers is a familiar mix of forgettable private equity barons or unaccountable foreign tycoons.

After the disappointing ownership of American drugs giant Walgreens and serial deal maker Stefano Pessina, one of the high street’s best known and oldest names is crying out to be revived and restored to past glories.

A return to the steady hand of the UK stock market would have been the perfect tonic to more than 15 years of drift. When Pessina first pounced in 2005, investors were assured that a deal with the Italian’s Alliance Unichem drug distribution outfit would be transformative for a chain that was in the grip of a prolonged high street slowdown and struggling to compete with price-cutting supermarkets.

Instead it became little more than a pawn in Pessina’s empire as he plotted world domination, first with the backing of buyout titans and the original barbarians at the gate, KKR, then through an audacious reverse takeover of Illinois-based Walgreens. But increasingly Boots was relegated to the status of distant and forgotten overseas outpost, while the debt-laden private equity financing model that fuelled expansion dragged down its British arm.

Sadly, a second stint on the public markets has all-but been ruled out, paving the way for it to be offloaded to the highest bidder in the sort of unimaginative fashion that the City excels in. Boots management should strain every sinew to avoid a straight sale to yet another private equity house but with Walgreens reportedly keen to retain a minority stake, it will be harder for the chain’s bosses to determine its fate.

The private equity model is great at lining the pockets of industry executives and its investors but such riches usually come at the expense of the companies that are bought, in the form of under-investment, over-borrowing and repeated cost-cutting.

That should put Mumbai mega-mogul Mukesh Ambani firmly in the hot seat after he tabled a joint bid with American investment powerhouse Apollo, perhaps best known in the UK for a failed attempt to buy Morrisons last year.

There will be those that baulk at the prospect of Boots vanishing into an even bigger global empire in the form of Ambani’s sprawling Reliance Industries conglomerate, which has extensive interests spanning the media, telecoms, energy, and textiles industries.

Ambani himself is also an individual that divides opinion. With an estimated fortune of more than $100bn (£81bn) making him Asia’s second richest person, according to Forbes, the industrialist has bulldozed his way across India’s business scene, raising questions about the company’s methods and Ambani’s close ties to the country’s political elites.

In the past, officials and regulators have raised questions about the extent of Reliance’s influence, while anti-corruption campaigners have claimed that Ambani has been pulling the strings of India’s leaders, claims that Reliance has rejected.

Nevertheless, it’s not as if the West hasn’t had its fair share of influential billionaires stretching as far back as John D Rockefeller, who controlled 90pc of the world’s oil supply through Standard Oil until Teddy Roosevelt moved decisively to destroy its monopoly power by breaking the company up into 34 separate entities. Nor would Ambani be new to this country, having owned toy seller Hamleys since 2019.

There is no doubt that he is a ruthless businessman. In an attempt to dominate India’s telecoms industry, he has been able to crush rivals. Even Vodafone’s Indian venture was left staring bankruptcy in the face despite sinking €20bn (£17bn) into the country after Ambani’s mobile network Jio brutally undercut the competition by offering unlimited data and calls for just a few dollars a month.

Yet, unless there is evidence of wrongdoing, Ambani’s acute business acumen shouldn’t be overlooked. Boots has 2,200 stores, many of which are in desperate need of attention. Reliance has both the nous and the financial firepower to inject some much-needed pizazz back into its high street estate.

The retailer has also been unforgivably late to the online race, if indeed it has really embraced it at all. Customers complain of a clunky website, and instead of capitalising on the pandemic in the same way that the supermarkets managed to, Boots, with its vast collection of pharmaceuticals stores and an extensive drugs supply network, crashed to a £258m annual loss in 2020.

The resulting restructuring cost 6,500 jobs out of about 60,000, while 200 stores were axed. One would expect that Ambani, whose mobile arm has forged a tie-up with Facebook and established an online grocery venture called Jiomart that enables customers to buy goods via Whatsapp, has the digital prowess to drag Boots into the 21st century.

Meanwhile, Reliance offers the potential to be a lucrative springboard to Asia, a gigantic market Boots has never really cracked. There are risks with establishing stronger business links with India – its ambivalent position on Ukraine and powerful billionaire class included – but equally with experts predicting it will soon fulfil its potential as one of the world’ fastest growing economies after several false starts, the benefits may outweigh the hazards.

After more than a decade in the wilderness, Ambani could be the right medicine for sickly Boots.