A bidding war broke out for Alliance Boots PLC on Friday as a second private equity consortium came forward with an improved proposal after the pharmacy company accepted a 10.6 billion pound ($21.3 billion) bid from a group comprising its deputy chairman and Kohlberg Kravis Roberts & Co.
Boots shares soared 7.2 percent to 1,125 pence ($22.55) after the rival consortium including private equity group Terra Firma Investments, medical charity the Wellcome Trust and banking group HBOS PLC made an "indicative offer" worth 10.8 billion pounds ($21.6 billion).
Boots made no immediate comment on the approach from the Terra consortium.
Earlier Friday, the company recommended that its shareholders vote in favor of the sweetened bid from its deputy Chairman Stefano Pessina and KKR valued at 1,090 pence ($21.87) a share.
Alliance Boots Chairman Nigel Rudd said he was "delighted that the board has been able to achieve such a good price for shareholders."
KKR and Pessina, an Italian billionaire who is Alliance Boots' largest shareholder with a 15 percent stake, had raised their offer twice in an attempt to fend off an approach from the opposing consortium.
However, Terra, Wellcome and HBOS later said they had provided the Alliance Boots board with the terms of an indicative proposal worth 1,126 pence ($22.56) in cash per share and urged shareholders to take no action.
The payment to shareholders would be reduced to 1,115 pence ($22.34) per share because of the breakup fee that Boots has agreed to pay to KKR and Pessina if it now rejects their offer.
"No decision has been made by the consortium regarding the merits of making an offer for Alliance Boots and as a consequence there can be no certainty that an offer will be forthcoming," the Terra consortium said in a statement.
Alliance Boots was formed last year in a combination of drug distributor Alliance Unichem PLC and retail chain Boots Group PLC and has about 3,000 stores in Britain, seven other European countries and Thailand.
Around 2,600 of the stores are in Britain, and its status as a household name has prompted some debate about the merits of ownership by private equity for major British companies.
Friday's private equity bidding war follows the collapse of a bid for J Sainsbury PLC, the country's third-largest grocer, last week.
KKR was involved in the consortium that made an approach for Sainsbury, but pulled out of the bid before its collapse to focus on its Alliance Boots offer with Pessina, who caused an initial stir with his involvement.
Pessina, the executive deputy chairman of Alliance Unichem before the merger, was barred from emergency board meetings regarding the offer.
Pessina reportedly made his approach after becoming frustrated with the failure of investors and analysts to fully appreciate the value of the enlarged business.
Chief Executive Richard Baker announced plans last month to review around 100 of those locations, and will move stores that are too closely situated to other Boots stores. The rationalization of the stores will cost around 35 million pounds ($68.7 million) over the next three years.
On the distribution side, the company supplies more than 125,000 pharmacies, health centers and hospitals.
Source: AP Features