Boots’ shabby stores are not the only disappointment facing suitors

After umming and ahhing for several months, Walgreens, the Chicago-based retailer that owns Boots, last week finally confirmed what the City had known for some time.

Bosses said that they were “reviewing options” for the 173-year-old company. Flanked by Wall Street’s finest, Goldman Sachs, the statement centred around the financial sector’s old euphemism for “this business is up for sale”.

The expected price for Boots is of course being tightly guarded, but a valuation of anywhere between £5bn and £10bn has been touted.

When it comes to ranges, as one investment banker pointed out to me earlier this week, valuations rarely hit the top end and regularly trend towards the bottom. And for Boots such sentiment seems particularly wise.

Seb James, the former Dixons Carphone chief, has done a good job of getting Boots ready for sale since joining in 2018. After years of cost-cutting and underinvestment, Walgreens realised they needed to at least put some lipstick on the pig before it was sent to market.

Tired stores have been spruced up and a rocket has been put under Boots’ online operations. Walgreens says it has invested an eye-watering £2.8bn since it took control of the business in 2014 – though you might struggle to see where that has been spent in some shops.

Boots’ finances appear in half-decent nick too – or at least what we can see of them. Comparable retail sales rose 16pc in its most recent quarter. Boots.com has doubled in size since the start of the pandemic.

The retailer’s beauty business has also been going gangbusters. Sales of beauty products make-up half of all of those online. And Boots has a towering 40pc of the premium make-up market.

A more detailed assessment is tricky. Boots’ finances are consolidated into its US parent so picking apart the figures any further is nigh-on impossible.

It’s an overused word, but Boots is a unique asset. If you don’t go to Boots, where do you go? The likes of Superdrug and local pharmacies may lay claim to being competitors, but in reality that is all they are: claims. This is a market-leader in every sense of the word.

So with trillions of “dry powder” ready to be deployed by private equity, you would think that Boots would command top dollar from the great and the good of the buyout world.

If Morrisons is worth £10bn and Asda valued at nearly £7bn, one can only wonder what Boots could fetch.

It’s hardly surprising that the likes of CVC (which has joined forces with Bain), Apollo, Advent, KKR, and the billionaire Issa brothers are all having a look. But they may be disappointed when they peek a little closer.

For starters, unlike the supermarkets, Boots does not own many of its shops. It is predominantly a leasehold operation.

Freehold property is appealing to private equity firms because it allows them to stuff companies full of debt. Safe in the knowledge that they would have a lien over tangible assets, banks are willing to lend more and on better terms if companies own freeholds – as evidenced in the auctions for Morrisons and Asda.

Related Posts

they were looking for air defense and artillery depots in

They were looking for air defense and artillery depots: in Odesa, the SBU detained a couple of spies (photo)

Both were citizens of the Russian Federation, who were sent to Odessa four years ago. The SBU detained a couple of spies / SBU The Security Service…

the cash dollar in privatbank became cheaper

The cash dollar in “PrivatBank” became cheaper

You can sell American currency in the bank at the exchange rate of UAH 39.20. per dollar The exchange rate of the euro against the hryvnia rose…

the dream game journalists shared their impressions of diablo 4

The dream game: journalists shared their impressions of Diablo 4 and laid out new gameplay

According to reporters, this is exactly the project that fans deserve. Diablo 4 / photo by Blizzard Today, December 8, the ban on the publication of preliminary…

the life of the four signs of the zodiac will

The life of the four signs of the Zodiac will change dramatically right now

Who made it to this list – read on. Four signs of the Zodiac will change your life / msn.com December 8 will be a full moon,…

the ministry of defense adopted the dzvin as control system there

The Ministry of Defense adopted the “Dzvin-AS” control system: there were problems with it earlier

According to Reznikov, the system successfully passed departmental tests in the spring of 2022, and later – state tests. The Ministry of Defense adopted the “Dzvin-AS” management…

forecaster on the weather in the coming days the temperature

Forecaster on the weather in the coming days: “The temperature will jump to spring marks”

According to forecaster Nataliya Didenko, a significant increase in temperature is expected already in the coming weekend. Weather in Ukraine / photo In Ukraine, a significant warming…

Leave a Reply

Your email address will not be published. Required fields are marked *