Banks willing to back Reliance-Apollo bid for UK pharmacy chain Boots

Leading banks, according to sources in the know, are willing to finance a joint bid by Reliance Industries and US PE fund Apollo Global Manag­ement in case they acquire UK pharmacy chain Boots, a company controlled by Walgreens Boots Alliance.

A source aware of the development said: “Banks have no issue in financing the bid and the asking price seems to be reasonable.” According to reports, the price is $6-10 billion.

A Reliance Industries spokesperson said: “As a policy we do not comment on media speculation and rumours.”

The person added the company evaluated opportunities on an ongoing basis. A spokesperson for Boots UK, when asked if Reliance had given a bid, said: “We have no further comment on the strategic review process announced in January at this stage.” 

The willingness of banks to support a possible leveraged buyout could be key because in view of the Ukraine-Russia war and the consequent instability in the market such deals have become complex and many are reluctant to fund them. Other private equity players like Bain Capital and CVC Partners that had looked at the company decided not to pursue the deal.

Sources, however, point out a decision on putting in a bid or not could happen soon. But final discussion is on whether Reliance will be able to give the management the time to execute its growth plans for Boots, especially when it is putting together a strategy which includes acquisition in renewables, it has to roll out 5G services after the auctions are over, and it gives a major push to its retail business in the country after its deal to acquire Future group got stuck.

From the look of it, the two seem to be the only one in the fray after the Issa brothers, who own a super market chain Asda, and TDR Capital did not agree to increase their offers, according to reports.

However, that does not mean players that went out of the fray cannot bid again. Also Walgreens Boot Alliance has stated if the price does not match its expectations it will spin off the chain for to a company and go for an initial public offering. 

The potential investor has to contend with the Boots pension fund, which could ask for upfront cash from the investor as guarantee in case the company fails to perform and also because it is taking high leverage.    

Sources say Reliance-Apollo are looking at an emerging market play, including India, as well as West Asia, for the brand that could entail a huge expansion for Boots.

The 173-year-old business has over 2,200 stores in the UK, apart from pharmacies as well as a large play in the health and beauty business.

Reliance has entered the pharmacy business in India through Netmeds, an online pharma store it acquired in 2020, and is planning a big push into the beauty business and reportedly opening up 400 stores in the coming years where players like Nykaa reign supreme. It has also acquired genetics firm Strand Life sciences.

Reliance has acquired retail businesses abroad. In 2019 it bought toy store chain Hamleys for around Rs 620 crore. However, the Boots acquisition is in a different league.