Walgreens halts sale of Boots chain citing tougher financial conditions

Walgreens Boots Alliance has abandoned the sale process for the Boots chain in the UK after the upheaval in credit markets resulted in bids that were below its initial expectations.

The US group said on Tuesday that while there had been “significant interest” in the 173-year-old business, “unexpected and dramatic change” in the financial markets meant that no offers had been received that reflected the potential value of Boots and its No.7 beauty brand.

“WBA has decided that it is in the best interests of shareholders to keep focusing on the further growth and profitability of the two businesses,” it added.

Goldman Sachs was engaged to review options for the business as Walgreens’ new chief executive, Roz Brewer, opted to focus on health and wellness in its home market.

However Russia’s invasion of Ukraine earlier this year, coupled with rising interest rates in the US and UK, have virtually shut down Europe’s high-yield credit market to new issuers, making financing any heavily leveraged bids much more difficult.

That has affected the prices offered for the chain. The only entity to table a non-binding offer was a consortium of private equity group Apollo and Reliance Industries, the conglomerate controlled by Indian billionaire Mukesh Ambani. The offer valued the company at between £5bn and £6bn, according to people with knowledge of the deal.

Zuber and Mohsin Issa, the Blackburn-based brothers who part-own the EG petrol station group and UK supermarket chain Asda, were also interested in Boots but had not submitted a final bid.

Although Brewer said that the businesses were “uniquely positioned to continue to capture future opportunities” she did not rule out making a renewed attempt to offload them in the future.

“Longer term, we will stay open to all opportunities to maximise shareholder value for these businesses and across our company,” she said.

Nottingham-based Boots makes around two-fifths of its annual sales by dispensing prescriptions, vaccines and other services on behalf of Britain’s state-run health service.

The remainder comes from retailing of health and beauty products and personal care staples, a market that has grown increasingly competitive as supermarkets and discounters such as B&M and Home Bargains have expanded their ranges.

Although trading had started to recover after the Covid-19 pandemic and associated restrictions, Boots is burdened with over 2,000 stores, many of which are on struggling high streets and require investment.

Walgreens’ decision to abandon the sale process was first reported by Sky News.