US retailer Walgreens faces losing billions after the private equity firms earmarked to take over Boots valued the retailer much lower than Walgreens’ official price tag.
Private equity firms CVC and Bain, which had joined forces for a potential bid, originally indicated they would be willing to offer £4bn for Boots, according to The Telegraph. The two companies have now exited the sales process without lodging a formal offer.
Walgreens has placed a price tag of £7bn on the sale of Boots.
In 2014, the US retailer purchased the health and beauty giant for £9bn. It first acquired a 45% stake in 2012 before returning for the remaining 55% two years later.
The low valuation by CVC and Bain is particularly significant due to CVC managing partner Dominic Murphy’s long-term involvement with Boots.
Murphy was previously the architect of an Alliance Boots takeover in 2007 when he worked for private equity firm KKR. Prior to the takeover discussions, he was also a director at the Walgreens Boots Alliance, illustrating his in-depth knowledge of the business.
A City source told The Telegraph: “He [Mr Murphy] knows where the bodies are buried.”
Walgreens began exploring the possibility of a sale in December, with the Issa brothers, Apollo Global Management and Sycamore Capital still in the race to purchase the chain.
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