Kohlberg Kravis Roberts has won the bidding war for UK health and beauty chain Alliance Boots, after sweetening its offer to £11 billion ($22 billion) and buying more shares to take its current stake to about 10.5 percent.
A rival group comprising buyout firm Terra Firma, HBoS and the Wellcome Trust charity today withdrew its interest in Alliance Boots after KKR upped its offer by nearly 5 per cent and acquired a blocking stake.
KKR now looks almost certain to complete the £11 billion acquisition of Boots, which will be the largest leveraged buyout in Europe to date and the first time that a FTSE 100-listed company has fallen into private equity hands.
KKR this morning increased its bid to £11.39 per share or £11.02 billion. This is a 4.5 percent increase on its earlier £10.90 per share bid, and trumps the indicative £11.26 per share bid proposed by Terra Firma on Friday.
KKR also said that it had bought another 90 million shares in the UK-listed group on Monday and Tuesday, increasing its current stake to about 10.1 percent. Since Boots deputy chairman Stefano Pessina, who is bidding alongside KKR, already holds a 15 percent stake, KKR now controls about 25 percent of the company – an insurmountable obstacle for any competing bid.
“Boots is a critically important national institution, and we are naturally disappointed not to be able to execute the bold vision we had for the company and its critical role in the provision of healthcare in the UK,” Terra Firma said today, as it withdrew its offer.
Even before today’s events, the Terra Firma group was hampered by the £106 million break fee that would be payable to KKR if the current deal fell through. Deal sources said this break fee made it almost impossible for the rival group to compete on price, and questioned whether the board was right to agree to such a substantial sum.
The board of Alliance Boots said today it would recommend the sweetened offer, just as it did with KKR’s £10.90 per share bid on Friday.
At 13:00 BST, Alliance Boots shares were trading up 1.5 pence at £11.28.
One party that did not welcome the news was the GMB, an activist trade union, which again called on UK health secretary Patricia Hewitt to investigate how Boots would be able to support the leverage required for a deal of this magnitude.