The board of Alliance Boots, a UK health and beauty retailer, has rejected a potential £10 billion (€14.7 billion; $19.4 billion) buyout offer from Kohlberg Kravis Roberts as being too low, after the share price topped the mooted bid level this morning.
KKR, which is backing the company’s deputy chairman Stefano Pessina, approached Alliance Boots last week with an indicative offer of £10.00 per share. This would value the company at £9.69 billion, making it the largest European private equity deal to date.
However, following a board meeting today, the company released a statement rejecting the proposal, saying: “Alliance Boots does not believe it reflects the fundamental value of the Company or the attractive prospects, opportunities and synergies available to Alliance Boots following the very recent completion of its merger.”
News of KKR’s approach sent Alliance Boots shares soaring this morning. The share price hit the £10.00 level just after 11:00 GMT, up 70 pence or 7.31 percent on the opening price this morning and over 25 percent higher than a week ago. At one stage, it looked set to beat the 52 week high of £10.04, before slipping back to 996.50 pence following news of the board’s rejection.
Last Friday Alliance Boots was forced to release a statement to the stock exchange on Friday about the potential approach, after market speculation fuelled a big share price rise. The UK Financial Service Authority may yet decide to investigate this unusual trading, according to the London-based Observer newspaper.
In the statement, the company admitted it had received a “preliminary and highly conditional” approach from an unnamed suitor, which might not necessarily lead to an offer.
Later that day, KKR confirmed it was the party behind the bid, in a statement clearly designed to emphasise its non-hostile intentions. The buyout firm said it had made a “friendly approach” to Alliance Boots, and hoped to “to work closely with the existing executive management team to achieve the long-term vision of building a global leader in the healthcare services and beauty industries.”
It has been a busy month for KKR, which has also agreed the $45 billion buyout of US utility TXU, the largest private equity deal to date, and been part of a consortium mulling a £9 billion bid for UK retailer Sainsbury’s.