Walgreens Boots is said to have received offer from Bain for its Boots U.K. chain

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• Walgreens Boots (NASDAQ:WBA) is said to have received a takeover offer from private equity firm Bain Capital for its Boots drugstore chain in the U.K.
• Bain Capital offered to buy the U.K. chain two months ago, which started a sales process for the health and beauty retailer, according to a Times of London report. The PE firm is now positioning itself as a frontrunner in the auction. Boots owns about 25% of its stores and the chain may be valued at GBP6B pounds ($8.1B) to GBP7B pounds in a sale.
• Sky News first reported early last month that the pharmacy company was exploring a potential sale of its Boots chain in 2022.
• PE firms CVC Capital Partners, Carlyle, KKR & Co., Advent International, and Clayton, Dubilier & Rice may also be considering a bid for the U.K. chain, according to the Times. Supermarket chains may also pursue an acquisition.
• A sale of the Boots chain, which has 2,200 stores in the U.K., would come after AmerisourceBergen (NYSE:ABC) purchased Walgreen's Alliance Healthcare businesses for ~$6.5B last year.
• A sale of the Boots chain would undo a strategic combination that started between the two companies in 2012, when Walgreens agreed to purchase a 45% stake in Alliance Boots for $6.7B. In 2014, Walgreens exercised an option to buy the remainder of the company.

Comments

[Hobbes8807]

WBA and T twin sons from different mothers

[alexalekhine]

@Hobbes8807 Not at all. That's actually completely untrue.

[Exquisite Decay]

Two not so important questions, but I am going to ask them anyway.

1. Will Walgreen’s ticker symbol revert back to WAG after they sell off Boots? They changed their ticker to WBA (Walgreens Boots Alliance) upon buying BootsAlliance, but the A(lliance) part is already gone and when the B(oots) part is sold why keep the ticker WBA?

2. Will (should?) Walgreens be removed from the DOW Industrial index after they sell Boots? I thought it was such a strange choice anyway to add them to the DOW index.

[PennyPlanSupporter]

@Exquisite Decay

1. Ticker Symbol "W"

2. No...CVS deserves the slot, not Walgreens

[dogswithoutfleas]

This is one of the worst companies in the universe. Short short short

[d0d0ramefasolated0]

Sell it for a good price a good price. The plough it into the docinabox.

[Simsalabimsthlm]

why would someone open a pharmacy chain called ”boots”, too much for my ocd

[mbaietti]

@Simsalabimsthlm boots is not a pharmacy chain. It's primarily personal care products, lots of make up, skin care etc.

[Will5789]

@Simsalabimsthlm Founded by John Boot in 1849, some time before the hypercommercialisation of the 21st century.

[PennyPlanSupporter]

So another acquisition that has turned into a money loser. Selling at a loss when inflation is considered.

[Slade_01]

@PennyPlanSupporter Anyone check to see if AT&T and WBA management are close? They both sure know how to burn up value.

[User 503247]

@PennyPlanSupporter

Perhaps if you look only at price, but it also depends if they get $8.1B or closer to the $9.5B on the higher end.

You also have to account for the revenues that they brought in too, plus write downs, etc. Much more complex than just looking at two numbers being price paid and sold at price.

Total return matters when all things are considered - tax benefits, cash-flow that was able to be used, perhaps some distribution channels for products were opened up, etc.

[d0d0ramefasolated0]

@911Slade it does have a similar ring to it. Hope not.

[Always Bullish]

Hope the sale goes through. Buying boots made potential strategic sense before the pandemic but now is the time to unload it after what Great Britain went through. Walgreens is a safely sleep at night dividend achiever who like CVS is positioning itself as a local medical destination with its recent tie up with Village MD. They are on the right track for earnings expansion and dividend increases.

[Big Fat Dummy]

@DLSheeler I don’t follow WBA all that closely, but with all its acquisitions and subsequent divestments, I’d say it’s hard to say precisely what WBA is trying to become.

[rrkaas]

@DLSheeler that dividend is about they only thing returned or achieved

[trentbridge]

@Big Fat Dummy
WBA?
Promotion!
A Premier League Club!
(Google WBA)

[dmau3]

Bain will debt up the company, suck out the equity and in five years Boots will be gone.

[Will5789]

@dmau3 *floated on the FTSE

[financeminister]

@dmau3 sounds like the best thing Boots could do for investors

[TheHarlequin]

Boots has a strong, High Street pharmacy (prescription filling) presence in the U.K. which carries significant cash flow and economies of scale advantages because of the National Health Service. It also carries lower net profit margins. The advantages are unlikely to diminish unless High Street stores (pharmacies) are closed or there is an issue recruiting qualified staff. The pharmacy business attracts footfall into the stores which helps sell other products. The Boots No7 beauty line is very popular due to positive results from clinical trials which concluded that this beauty product was genuine, ie it actually worked. High Street (local) stores in the U.K. are disproportionately expensive compared to malls and online retail due to high rents, local taxes and staff costs. A lot of stores have been driven off the High Street in recent years. I think Walgreen’s expectations were too ambitious when they bought Boots and have subsequently lost interest in the business. There is a successful business hiding in there somewhere you just have to look in the right place for it then nurture it, not force it. Bain is an interesting proposition.

[alexalekhine]

@TheHarlequin you can have a clinical trial for a beauty product?

[locum2]

@alexalekhine, and exactly how do you measure more beauty?

[dlemerson]

@alexalekhine Absolutely! Although, safety is the priority

[mikewine99]

Think the stock will open higher Monday ?

[jraby583]

@mikewine99 50 50 chance

[Hugh Arhue]

Not sure this is a good idea. As long as it's not a fire sale, i guess. But this is the FCF generating Retail pharma you would think they would want to keep(?)

[HyGro]

@Hugh Arhue Boots was heavy into beauty and Walgreen's redid their U.S. stores to expand heavily into beauty too. Boots has gotten a lot of benefit from CoV but the beauty business hasn't done that well and the currency is not in their favor with the strong dollar.

Walgreen's U.S. has changed their orientation away from beauty and into Village Health medical, plus licensed departments in optical, hearing and orthodontic (SmileDirect). Looks like the big jump in Boots CoV revenue make it a good time to sell at the top and with many suitors bidding for it, might get a bidding war going.

[Hugh Arhue]

@HyGro Thank you for your response. Sticking with the Logic; Trade the market in front of you, not the one you want. . . , What is your estimated valuation/market price for Boots; and what do you think would be a reasonable premium a PE firm would pay?

[HyGro]

@Hugh Arhue -- The other question is what will Walgreens do with the new capital. Will the continue expanding their in-store medical services as it appears, how successful will the be with that, incremental revenue/profits will it provide. The beauty pivot after Boots doesn't appear to have been particularly successful -- what will medical services do? CVS has a headstart, Wal-Mart is in, what's the prospect for Walgreens? Will they be able to do better than CVS has done? That seems like a long-term return part of of the ROI on the newly freed up capital.

[Mark Foeller]

If a 45% stake was valued at $6.7B in 2012, that would indicate a $14.9B valuation (in 2012 dollars) for all of Alliance Boots.
So they sold the Alliance part for $6.5B last year, and now the Boots portion may go for $8.1B? Sounds like they've lost money, without even considering inflation and time value!

[dmau3]

@Mark Foeller WBA is ten years and ten billion dollars in investment behind CVS. WBA's approach to the business has been all wrong.

[DGInvestor45]

@Mark Foeller True but what has been the net profit/cash flow since 2012?

[Cruz Cardenas]

Maybe they can upgrade the IC+ system for the pharmacies with the money. Horrible system.

[vireoman]

"A sale of the Boots chain would *undo*........."

[stkedu7]

Any idea what they’ll do with the cash? Pay off debt, buy back stock, special dividend?

[Meepgoesmoo]

@stkedu7 it will just go into Pessinas pocket.

[25540633]

@stkedu7
CEO Roz Brewer would use partial of the proceeds to expand Village MD clinics besides what you had indicated above.