Australian pharmacy pulls out of talks to buy Boots, rekindling stock market hopes
Australian pharmacy giant Sigma has pulled out of talks to buy Boots – rekindling hopes of its return to the London stock market.
Sycamore Partners, which last year bought Boots’ US parent Walgreens Boots Alliance, has been in discussions with potential buyers over a £7.5billion sale.
Excitement over a potential listing was dashed when it was revealed last week that conversations with suitors – including the billionaire Weston family – have been going on since Easter.
But Sigma Healthcare, which is listed on the Australian stock exchange and has been seeking international expansion, said on Monday that after a ‘preliminary review’ it had decided a takeover ‘would not currently meet its strategic and capital investment objectives.’
It confirmed it had engaged in sales talks ‘given the potentially unique opportunity it presented to accelerate its UK expansion through the market-leading Boots brand and large footprint.’
Shares in Sigma rose 6 per cent in Australia. Investors appeared to see the decision as a ‘bullet dodged’, due to ‘concern about the risks associated with any big international takeover’, according to Russ Mould, investment director at AJ Bell.
A return after a 19-year absence from the UK stock market would be a much-needed vote of confidence for the City.
Sigma Healthcare said a takeover ‘would not currently meet its strategic and capital investment objectives.’
Mould added: ‘A Boots IPO would be a much-needed boost for the London market. There have been several high-profile departures thanks to takeovers or a change in listing venue in recent years and this has been compounded by a distinct lack of fresh blood coming in.’
It is understood that no decisions have been made by the Westons, who are best-known in the UK for the Associated British Foods empire, which contains fashion chain Primark, but also own department store Fortnum & Mason.
The talks with Boots involve the Canadian branch of the Westons, which owns pharmacy chain Shoppers Drug Mart through the family’s Wittington Investments firm.
Buyout group Sycamore Partners broke up Boots’ former owner Walgreens Boots Alliance in August last year after its £7.4billion takeover of the US group, creating the Boots Group in the process.
This includes the chemist’s UK and Irish chains, Boots Opticians and the No7 Beauty Company. Walgreens Boots Alliance boss, Italian billionaire Stefano Pessina, and his wife, Ornella Barra, continue to own a 44 per cent stake in Boots.
Earlier this year, Pessina, who originally brought together Boots and US chemists Walgreens in 2012, said Sycamore ‘will, of course, have to sell [Boots] sooner or later’.
There was growing confidence that Boots, which employs 51,000 staff in Britain, could float.
News that Currys boss Alex Baldock was set to take the reins at the group that started as a family herbal medicine shop in Nottingham in 1849 had also added to optimism that it would return to the London stock exchange.
Industry experts have said that Boots has become more attractive to potential suitors as it cashes in on strong beauty sales.
A source close to the discussions told the Mail last week: ‘It’s very preliminary but talks are ongoing. You shouldn’t expect a deal on Monday morning.
‘But a relatively quick trade sale this year is seen as preferable to an IPO next year given all the uncertainty that brings.’
Jonathan De Mello, founder and chief executive of JDM Retail, said: ‘Sigma’s sudden exit from the £7.5bn Boots bidding war is a classic case of corporate stage fright, with the Australians realising that absorbing a retail behemoth of this scale simply wouldn’t satisfy their strict capital objectives.’
He added: ‘Sycamore Partners have spent months future-proofing the business into a higher margin beauty and wellness destination, and with former Currys boss Alex Baldock already waiting in the wings as the incoming chief executive, the stage is perfectly set for a dramatic return to the FTSE that would give the London Stock Exchange the shot in the arm it desperately needs.’
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