News has been released this afternoon that Walgreen, a US company that operates 7,890 pharmacies across the United States, is buying a 45% stake in Boots, which has more than 3,300 health and beauty retail stores in the UK and 11 countries around the world, a strong internet retail presence, a manufacturing facility in Nottingham, as well as a wholesale business which supplies pharmacies and doctors in 21 countries. The deal, which is being reported as a MERGER rather than a takeover, has been under discussion for 18 months, although it still has to be agreed by regulators. Walgreen also have the option to take the remaining 55% of the shares in the next three years.
Boots, or more correctly Alliance Boots, is privately owned - the owners are private equity firm KKR and the company Chairman Stefano Pessina, who bought the business in 2009. It seems that the deal will provide a geographical market development, and opportunity for horizontal expansion for Walgreen. This appears to be their objective. According to the Washington Post, the deal also may help Walgreen cope with a recent loss of U.S. customers after its contract with employee- benefits and prescriptions manager Express Scripts Inc. ended last year. There is also an incentive for Stefano Pessina, who will now have an 8% share in the ownership of Walgreen and gains a seat on the board.
Should employees of Alliance Boots in the UK be worried? Not according to this BBC report; Walgreen’s chief executive Gregory Wasson who has said “The UK will become the centre to develop and manufacture new products for a fantastic market like the American market. New York is the window of the world”, and Robert Peston’s initial reaction is to suggest that the deal could create a world manufacturing centre in Nottingham, potentially increasing the number of jobs.
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