Boots shares soar as bidding war erupts

A Terra Firma-led consortium has made a £10.85 billion buyout offer for Alliance Boots, just hours after the UK chemist accepted a sweetened £10.6 billion bid from Kohlberg Kravis Roberts. The company’s share price soared as investors anticipated a bidding war.

An all-out bidding war erupted this morning for Alliance Boots, a UK-listed health and beauty chain, after Kohlberg Kravis Roberts had a £10.6 billion (€15.6 billion; $21.2 billion) bid accepted by the board, only to be trumped by a higher offer from a Terra Firma-led consortium just hours later.

Alliance Boots said this morning it had accepted a £10.6 billion offer from KKR, after the buyout firm agreed to increase its offer to £10.90 per share.

However just hours later, a consortium comprising buyout firm Terra Firma, the Wellcome Trust charity and HBoS bank, hit back with an indicative £10.85 billion bid, at £11.26 per share. The consortium said this would be worth £11.15 to shareholders after the payment of a break fee to KKR, although it stressed that it had not made a final decision yet and so the bid may still not materialise.

The bids were welcome news for Boots stockholders, who this morning saw the share price soar as high as £11.41, before settling to £11.35 at 11:20 BST, up 85.5 pence. This equates to a market capitalisation of £10.96 billion.

Either bid would make Alliance Boots the biggest private equity deal to date in Europe, eclipsing the €12.2 billion acquisition of Danish firm TDC in 2006.

KKR had been forced to increase its offer by 5 percent, from £10.45 per share to £10.90 per share, after the Terra Firma group made an indicative bid at £10.85 per share earlier this week. Its offer, which is 9 percent higher than its original £10 per share bid, represents a 33.7 percent premium on the closing share price on March 8, the day before KKR’s interest leaked.

Announcing the agreed KKR bid this morning, Alliance Boots chairman Sir Nigel Rudd said he was “delighted that the Board has been able to achieve such a good price for shareholders.”

However, Terra Firma hit back immediately, urging shareholders to take no action, saying that it had made a request for “limited additional due diligence” and was awaiting a response. It said it had not yet decided whether to increase its indicative offer, which was made on Tuesday this week – only to announce another indicative bid hours later.