Private equity firms set for tilt at Boots after approach by Bain

The American owner of Boots received a takeover approach from Bain Capital more than two months ago that started the potential sale of the British high street chain, The Times has learnt.

It is understood that Bain, the private equity firm that recently failed in its attempt to buy LV=, the insurer, is positioning itself as a frontrunner in a forthcoming auction for Boots after completing months of due diligence on the health and beauty retailer.

The firm has sounded out a handful of retail industry veterans about chairing Boots should it be successful. A Bain Capital spokesman declined to comment.

Last month it emerged that Walgreens Boots Alliance had instructed Goldman Sachs, the American investment bank, to explore options for Boots, which bankers said was an attempt to flush out more interest and fetch a higher price for the company.

Boots was founded by John Boot in 1859 in Nottingham, selling herbal remedies. Owned by Walgreens since 2014, it has 2,200 shops and 550 opticians employs about 51,000 people.

Initial reports suggested that Boots could be valued at as much as £12 billion, but several sources said that the price tag would be much more likely to be about £6 billion to £7 billion. Industry bankers said that the group was unlikely to sell for more than the recent £7.1 billion Wm Morrison takeover because Boots owned the freehold of only about a quarter of its shops, which reduces its value.

Nevertheless, the world’s largest private equity firms, including CVC, Carlyle, KKR, Blackstone, Advent and Clayton, Dubilier & Rice, are thought to be exploring an offer because Boots presents a rare opportunity to put their billions of undeployed capital to work. One banker said that while Boots was not fast-growing, it was resilient and generated huge amounts of cash. Boots has also started offering more healthcare services, such as its GP trial in Brighton and the rollout of vaccines.

J Sainsbury and Tesco also have been tipped by analysts as potential buyers of Boots. One banker said that a deal with Sainsbury’s made a lot of sense because of their large customer overlaps.