U.S. drugstore giant Walgreens
WBA
has abandoned the sale of the U.K.’s leading pharmacy chain Boots, with the debt-financing markets apparently derailing its plans.

The Walgreens Boots Alliance (WBA) announced its decision to keep its Boots and No7 Beauty Company businesses under its existing ownership this morning, U.S. time.

In a statement is said: “This marks the conclusion of the review that began in January in line with the company’s strategic priorities. WBA has been encouraged by productive discussions held with a range of parties, receiving significant interest from prospective buyers. However, since launching the process, the global financial markets have suffered unexpected and dramatic change.

“As a result of market instability severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots and No7 Beauty Company. Consequently, WBA has decided that it is in the best interests of shareholders to keep focusing on the further growth and profitability of the two businesses.

Boots Investment To Continue

Boots is the U.K.’s leading health and beauty retailer and since the formation of WBA at the end of 2014, the company has “significantly invested” in Boots and No7 Beauty Company, with the Walgreens Boots Alliance pledging to continue investing in the future of these two businesses.

Chief Executive Officer, Rosalind Brewer, said: “We have now completed a thorough review of Boots and No7 Beauty Company, with the outcome reflecting rapidly evolving and challenging financial market conditions beyond our control. It is an exciting time for these businesses, which are uniquely positioned to continue to capture future opportunities presented by the growing healthcare and beauty markets.”

The decision to retain ownership of Boots after an auction process that had been going on for several months is understood to have hit a series of challenges in recent weeks, with the only bidder coming forward to make a binding offer for Boots – a consortium of Apollo Global Management
APO
and Reliance Industries.

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They had been pinning their acquisition hopes on the support of a quartet of lenders.

Frontrunners Fall Away

Early frontrunners to takeover Boots had included gas station tycoons the Issa brothers and private equity firm TDR Capital, which had previously bought U.K. grocery chain Asda for a then $8.8 billion from Walmart after a merger with rival supermarket group Sainsbury was blocked as anti-competitive in 2019.

Private equity firms TDR Capital, Apollo and Sycamore Partners had also submitted non-binding bids as part of their attempt to acquire Boots.

Previous suitors – and an early favorite – included a Bain Capital
BCSF
and CVC Capital Partners consortium, which abandoned its first-round bid earlier this year, at the time throwing a potential Boots’ sale into doubt.

However, growing concerns about the global economy and the instability caused by war in Ukraine have triggered severe doubts among the major banks which typically provide finance for leveraged buyouts, with the deal for Boots set to be among the the biggest such deals in Europe.

The markets will now await with keen interest the future direction of Walgreens – which is increasingly moving towards medical care and services – and Boots.

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