Boots alert for John Lewis: Money doesn’t care about heritage – British retail names have to be careful what they wish for, says ALEX BRUMMER
- Middle England anxious about prospects for partnership-owned John Lewis
- Lessons for boss Sharon White are obvious
- Be careful of what happens when you let financial foxes into the chicken coop
Middle England is in grave anxiety about the prospects for partnership-owned John Lewis, one of the nation’s favourite retailers.
The worry is well placed. When emblematic British companies look to outsiders for salvation, finance and inspiration, the outcomes are rarely what stakeholders wish for.
Boots the chemist is hugely illustrative. It is a fixture on almost every high street in the land with more than 2,200 stores.
As the country’s largest pharmacist it has vital links to the NHS and has long been the training ground for independent chemists.
Moreover, it is an innovator developing the uniquely British No7 beauty brand, which remarkably is a pioneer in addressing the ageing problems of skin.
Signing off?: Middle England is in grave anxiety about the prospects for partnership-owned John Lewis
Given all of this, it should be regarded as a company to be treasured. The Italian pharmacy entrepreneur Stefano Pessina recognised this when he merged Boots with his Alliance Unichem chain in 2006. A year later Nigel Rudd, ‘the man who sold Britain’, disposed of Boots to a Pessina-led consortium including private equity.
Pessina was on a mission to create the first global pharmacy empire and I recall him setting out his dream of chains stretching across the Atlantic and tapping into fast-growing Asian markets.
Pessina’s ambition was admirable but when drug store giant Walgreens took full control of Alliance Boots almost a decade ago, it became an overseas arm of a North American-focused empire. The gradual loss of command and control saw its manufacturing arm in Nottingham sold to Reckitt Benckiser, its tax domicile shifted to Zug in Switzerland and a court battle over the future of the pension fund.
What has been clear since before Covid (where Boots had a vital role in delivering vaccines, medicines and testing) is that Walgreens, supported by private equity, wanted a way out. It is to the credit of UK boss Seb James that he has kept Boots functioning through ownership struggles.
What is now plain (as reported by The Mail on Sunday) is Walgreens’ ambitions are elsewhere, as it seeks to dominate the primary care space in the US with a rapid-fire series of acquisitions.
In Britain, pharmacists are seeking the right to prescribe. In the US, not only does that already exist but the drug stores are acquiring the medical practices! Walgreens is under pressure from shareholders and its board to ditch Boots and other international operations, surplus to requirements, by the second half of the year.
Tightened credit conditions, after this spring’s banking turbulence, might well mean a private equity purchase is unlikely.
The poor experience of Clayton Dubilier & Rice with Morrisons does not augur well. After 17 years in unsafe ownership, Boots could be coming home as an initial public offering unless the bankers decide a higher price can be obtained on Wall Street.
The sadness of overseas ownership means Boots has gone backwards, with mounting losses and a bloated store portfolio in need of refurbishment and investment.
The lessons for Sharon White at John Lewis are obvious. Be careful of what happens when you let financial foxes into the chicken coop. Silent joint investors, such as Abrdn in John Lewis housing schemes, may just about work.
Pessina might still value Boots but he can no longer keep financiers at bay. In the end, money doesn’t care about branding, heritage or culture. Great British retail names have to be careful what they wish for.