Potential Boots and Shein IPOs show ‘there is life’ in the City

At a time when the health of the London Stock Exchange (LSE) has been a subject of discussion as more and more companies get delisted or move elsewhere, the City could greatly benefit if plans for the Boots and Shein IPO materialise, city analysts told Retail Week. 

Clive Black, vice chair of Shore Capital, said: “The London Stock Exchange has faced a challenging few years, that has probably more to do with the incompetence and incapability of the British government more than anything else.   

“What the UK government has done, in that respect, is make the UK a less attractive place to invest. As a result of that, investors, both from the UK and international markets have understandably applied their capital elsewhere. So the plight of the London Stock Exchange is a self-inflicted wound, unfortunately.  

“But interestingly enough, this week, we haven’t just had the news that Boots may be exploring an LSE listing but also Shein. So maybe there is life in the old dog yet.” 

This comes after news broke out that Boots owner, Walgreens Boots Alliance, may be exploring a London IPO for the Boots chain as part of its plan to offload the UK’s largest health and beauty retailer. 

Walgreens, which is in early talks to sell Boots, may be exploring a public listing for the health and beauty chain as one of the possibilities going ahead.

Boots agreed to transfer £4.8bn of pension obligations to insurer Legal & General in a deal that potentially paves the way for a sale by owner Walgreens.

Last year, the US pharmacy chain unexpectedly halted plans to sell Boots last year due to an “unexpected and dramatic change” in market conditions.   

If Boots were to float on the LSE, Black said “the devil will be in the details” in terms of the valuation it may achieve and whether the market will welcome it or not. 

He said: “From a Walgreens perspective, the devil will be in the detail. The valuation that Boots will achieve will reflect how prospective investors perceive the future of that company. Equity capital markets are all about the future.  

”For example, is the motive behind the IPO just so that a new Boots can reduce its debt and pay Walgreens cash, or are the proceeds from the IPO going to be used to try and grow the business? If it’s just about debt reduction and rewarding or paying off Walgreens then I would expect investors to demand quite a low price.  

“If there is a narrative that says Boots has got a future. Boots can grow from some of its very strong foundations like the high level of trust women in particular in the UK have for the brand, the No7 franchise, convenience food offer, or its pharmacies. If those core elements of Boots provide the skirt to grow in-store and online then maybe there is an investment thesis that proves attractive and may indeed garner a nice valuation.  

”But if the IPO is just a pay Walgreen and pay bankers debt, then it’s expected to have a very low valuation.”