Concerns have risen over Boots’ sale amid rumours potential buyers have run into lending issues.
Dwindling consumer spending has spooked some buyers, according to The Sunday Times, while soaring inflation and a rise in interest rates has pushed up borrowing costs.
As a result, the brothers who own Asda, Moshin and Zuber Issa, may lose out on their bid for Boots, with private equity group TDR, due to difficulties in raising finance.
“It’s looking tough. The debt markets are closed,” a source close to the Issa brothers told the publication.
A deal, however, was tabled by US private equity Apollo and Mukesh Ambani’s Reliance Industries – which is circling Revlon for a buyout – £1.5bn under the £7bn asking price, which would allow Boots’ owner Walgreens Boots Alliance (WBA) to keep a stake.
Frontrunners Bain Capital and CVC Capital Partners pulled out of the race for Boots in March.
Apollo’s financing is said to have been raised from investment banks with higher interest rates than what was on offer last year.
WBA is expected to update the market on its progress of the sale at its third quarter results on 30 June.
If the American retail group were to accept an offer, Boots’ £7bn pension fund would need to be negotiated with trustees.
A new beginning
Boots, the UK’s number one healthcare and beauty retailer, was put on the market in January 2022.
Goldman Sachs, the Wall Street bank, was called in to oversee the sale of the 172-year-old highstreet chain, which could have resulted in a spin-off business.
Boots, however, is unlikely to be listed as a separate company due to market turmoil.
Boots’ current network of stores spans 2,200 and is one of the UK’s largest private sector employers with 55,000 people.
Despite its size, the retailer – like its competitors – struggled to hit targets throughout the Covid-19 pandemic, even though it was allowed to remain open as an essential retailer.
In the months that followed the UK’s first lockdown, Boots became a problem child for WBA with sales dipping almost 30% in fiscal 2020.
WBA was forced to reduce its guidance for the company’s 2021 performance to low single-digit growth.
