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Boots suitor pins hopes on quartet of lenders as debt market jitters grow

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The only bidder to make a binding offer for Boots, Britain’s biggest high street chemist, is pinning its hopes on a quartet of lenders even as jitters grow in global debt markets about large-scale takeover deals.

Sky News has learnt that a consortium comprising Apollo Global Management and the Indian behemoth Reliance Industries has lined up Royal Bank of Canada, Credit Suisse, Santander, and Bank of America to help finance a large chunk of the £5bn-plus acquisition.

People close to the bid, on which RBC is also advising the consortium, insisted on Wednesday that it remained on track even as doubts grow about the lenders’ commitment to the deal.

One City source suggested that the financing commitments looked “shaky”.

Financing markets have soured dramatically since Boots was put up for sale by Walgreens Boots Alliance, its New York-listed parent, several months ago.

Part of the Apollo-Reliance bid would be funded by equity, the insider said, although it was unclear how much debt would be piled onto Boots in the event of a sale.

WBA may also retain a significant minority stake in Boots in order to get the deal through.

Another prospective bid from the owners of Asda – Mohsin and Zuber Issa and TDR Capital – remains uncertain.

WBA, which is being advised by Goldman Sachs, has decided that the UK pharmacy chain is no longer core as it refocuses on its domestic operations.

Among the other challenges facing bidders is how to overcome difficult financing markets, as well as finding an adequate solution for Boots’ £8bn pension scheme – one of the largest private retirement funds in the UK.

If a formal bid does not materialise at a level deemed acceptable to the WBA board, the company is likely to abort the sale process.

Sky News revealed earlier this year that an apparent early frontrunner in the Boots auction – a joint bid from Bain Capital and CVC Capital Partners – had decided not to proceed amid scepticism over the price tag of up to £6bn.

Like many retailers, Boots had a turbulent pandemic, announcing 4000 job cuts in 2020 as a consequence of a restructuring of its Nottingham head office and store management teams.

It has also been embroiled in rows with landlords about delayed rent payments.

Shortly before the pandemic, Boots earmarked about 200 of its UK stores for closure, a reflection of changing shopping habits.

Boots’ heritage dates back to John Boot opening a herbal remedies store in Nottingham in 1849.

It opened its 1000th UK store in 1933.

For Stefano Pessina, the WBA chairman, a decision to sell Boots outright would mark the final chapter of his involvement with one of Britain’s best-known companies.

The Italian octogenarian engineered the merger of Boots and Alliance Unichem, a drug wholesaler, in 2006, with the buyout firm KKR acquiring the combined group in an £11bn deal the following year.

In 2012, Walgreens acquired a 45% stake in Alliance Boots, completing its buyout of the business two years later.

A spokeswoman for the Apollo-Reliance consortium declined to comment.

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