Jun 28, 2022
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WBA ends Boots auction as bidders fail to meet its price

Jun 28, 2022

After months of speculation about who would become the new owner of the giant UK health and beauty Boots business, the answer is… nobody. The retailer’s owner has pulled the company from sale with buyers unwilling to pay the premium price it wanted and less able to raise debt-funded cash in the current volatile markets.

Boots No7

Owner Walgreens Boots Alliance on Tuesday announced its decision “to keep its Boots and No7 Beauty Company businesses under its existing ownership. This marks the conclusion of the review that began in January in line with the company’s strategic priorities”.

The company added that it had been “encouraged by productive discussions held with a range of parties, receiving significant interest from prospective buyers. However, since launching the process, the global financial markets have suffered unexpected and dramatic change. As a result of market instability severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots and No7 Beauty Company. 

“Consequently, WBA has decided that it is in the best interests of shareholders to keep focusing on the further growth and profitability of the two businesses.

“The decision to retain the businesses has also been supported by the ongoing strong performance and growth of Boots and No7 Beauty Company, which have exceeded expectations despite challenging conditions.”

There had been speculation that the company was looking for a sale price of around £7 billion for the business, but prospective buyers such as India-based Reliance and the UK's owner of the Asda chain reportedly only wanted to pay £5 billion, although WBA retaining a stake in the business might also have been part of such a purchase. Just this week it had been reported that Reliance was on the verge of putting the financing in place to seal a deal.

Back in 2014 it was suggested the business was worth £9 billion and it’s significant that WBA wasn't prepared to sell at a knockdown price and the recovery at Boots is clearly partly behind this determination to get a good price or to exit the process.

Boots is the UK’s leading health and beauty retailer, and WBA said it “benefits from its unique position as one of the most trusted and well-respected brands in the country”. 

Since the formation of WBA at the end of 2014, the company has “significantly invested in Boots and No7 Beauty Company. Given their unmatched assets and unparalleled potential, Walgreens Boots Alliance will continue investing in the future of these two businesses”.

And Boots appears to have been paying its way in recent periods with a noticeable improvement in its performance post-pandemic.

Of course, that doesn't mean it's completely out of the woods yet and it still faces a hugely competitive situation in the UK. With more than 2,000 stores, it needs to continue investing in its physical spaces as a number of its locations still look behind the times and in need of a facelift.

The company also needs to continue investing in its online business that, admittedly, is a major player in the British beauty sector already.

But rivals are always eyeing its huge market share, whether that's in the mass-market (such as competitors like Superdrug and the supermarkets), or higher up the price scale, with both physical and online rivals ramping up their efforts to win share in the lucrative beauty market.

WBA's statement on Tuesday also subtly held out the prospect that the sale idea might be revisited later.

CEO Rosalind Brewer said: “We have now completed a thorough review of Boots and No7 Beauty Company, with the outcome reflecting rapidly evolving and challenging financial market conditions beyond our control. It is an exciting time for these businesses, which are uniquely positioned to continue to capture future opportunities presented by the growing healthcare and beauty markets. The board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximise shareholder value for these businesses and across our company.”

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