Asda owners the Issa brothers are on verge of dropping their bid for Boots over a disagreement on price
Double act: Zuber and Mohsin Issa
Asda owners the Issa brothers are on the verge of dropping their bid for Boots over a disagreement on price.
Zuber and Mohsin Issa, who are teaming up with private equity firm TDR Capital to buy Boots, are getting cold feet after Walgreens – the pharmacy chain’s US owner – asked them for more.
They are thinking of walking away, a Bloomberg report says, which would be a blow to Walgreens, which was hoping for as much competition as possible to drive up the price.
The Issas’ consortium was one of the two main suitors left vying for Boots, the other being Indian billionaire Mukesh Ambani’s Reliance Industries and US private equity titan Apollo Global Management.
Walgreens has been touting Nottingham-based Boots for around £7billion, though bidders are said to be hoping to pay closer to £5billion.
Founded by John Boot in 1859, it is the UK’s largest pharmacy and beauty retailer. It now sells products around the world, and in the year ending August 2021 it had more than 315,000 staff, with sales of £105billion.
The Issas first teamed up with TDR to buy Asda in 2020 for £6.8billion. As well as eyeing Boots, they tried to buy convenience chain McColl’s – but were beaten by Morrisons.
Representatives for the Issas and TDR declined to comment.
A successful sale of Boots would be the biggest deal to happen in the UK since the cost of living crisis began to bite, and would show private equity firms still have the appetite to buy in a more uncertain economic environment.
Interest rates are rising as central banks try to tame inflation, but this pushes up the cost of debt for buyout firms who borrow to help pay for the businesses they buy.
Experts at the World Economic Forum meeting in Davos last week said private equity interest in the UK would probably hold strong, despite rising rates.
They noted that the Bank of England’s base rate – at 1 per cent – was low by historic standards, and buyouts would be driven by businesses needing money to adapt to a greener and post-pandemic future.