Buyout groups Bain and CVC team up for potential Boots bid

Private equity groups Bain Capital and CVC Capital Partners have teamed up to work on a planned bid for Boots after its US owner hired advisers last month to explore options for the UK high street chemist chain, including a sale.

The buyout groups were jointly considering an approach, two people with knowledge of the matter said, although talks were at an early stage and it was possible that no offer would materialise. No formal process had kicked off yet, one of the people added.

Bain and CVC believe Boots could be run more profitably as a standalone company than as an outpost of Chicago-based Walgreens Boots Alliance and that it could grow by expanding its digital operations, the people said.

Walgreens lined up Goldman Sachs last year to look at splitting off Boots and either selling it or listing it as a standalone company.

Bain and CVC declined to comment. Sky News first reported that the pair were working together.

CVC has a history of owning UK high street retailers, having bought Debenhams in 2003 alongside TPG and Merrill Lynch Private Equity, before listing it three years later. The private equity groups made large profits on the deal, but they became a target for opprobrium when the retailer later struggled as they had piled debt on to the company and sold off its stores.

The US private equity group KKR took Boots private in 2007, alongside Italian pharmacy magnate Stefano Pessina, in what was then the UK’s largest leveraged buyout.

Dominic Murphy, one of the key figures behind KKR’s takeover of Boots, is now a managing partner at CVC.

Walgreens bought a 45 per cent stake in Boots in 2012 and took control of the chemist chain in 2014, with Pessina as chief executive. Last year, Walgreens Boots Alliance appointed Roz Brewer as chief executive, with Pessina becoming executive chair.

Private equity groups have snapped up several large UK-based companies in recent years, with Clayton, Dubilier & Rice buying supermarket chain Morrisons and TDR Capital buying Asda with brothers Mohsin and Zuber Issa.

In the year to August 2020, Boots made an operating loss of £245m against a profit of £198m the year before. The retailer suffered during Covid-related lockdowns, when retail activity dropped even as pharmacies remained open to dispense prescriptions.

Walgreens completed the $6.5bn sale of a majority stake in its Alliance Healthcare business in June 2021, a move that helped it cut debt by about $2bn, mitigating the impact of the pandemic, according to Fitch Ratings.