A bidding war for Alliance Boots PLC appeared to have ended almost as soon as it began after a group comprising its deputy chairman and a private equity firm raised its bid for the pharmacy company for the third time on Tuesday.
Alliance Boots said it planned to recommend the offer valuing the company at around 11 billion pounds ($22 billion) to its shareholders, leaving a rival consortium led by financier Guy Hands out in the cold.
"This is a very, very full price and could be the end of the game," said Richard Ratner, an analyst at Seymour Pierce stockbrokers.
The pharmaceutical and retail company said the sweetened offer from deputy chairman Stefano Pessina and Kohlberg Kravis Roberts & Co. of 1,139 pence ($22.80) per share was "fair and reasonable."
The revised offer and the board's recommendation followed KKR and Pessina's acquisition of two large blocks of Alliance Boots shares, taking its stake in the company to around 21 percent, including 6 percent held by the consortium's takeover vehicle AB Acquisitions.
The new bid tops the 1,126 pence ($22.54) per share, or 10.8 billion pounds ($21.6 billion), put forward Friday by Hands' private equity firm, Terra Firma Capital Partners Ltd., together with medical research charity Wellcome Trust and HBOS PLC.
The KKR-Pessina offer is also at a premium to Alliance Boots' current share price of 1,128.5 pence ($22.59) up 0.2 percent on Monday's close. The stock has soared in recent days amid speculation and announcement of the offers.
Nick Bubb, an analyst at Pali International stockbrokers, believed that the Terra Firma group would now back down.
"It is possible that they will respond with a 1,165 pence ($23.32) offer, but the price is getting steep and there must be no more than a 10 percent chance," Bubb said.
KKR and Pessina, an Italian billionaire who is Alliance Boots' largest shareholder with a 15 percent stake, have raised their offer several times in an attempt to fend off Hands' consortium.
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.
On the distribution side, the company supplies more than 125,000 pharmacies, health centers and hospitals.
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.
Source: AP Features