CityBeat: Merger mania
Glynn Davis looks at a likely candidate for the next round of M&A activity.
March 13 2003
Mergers and acquisitions have made a bit of a return of late – fuelled by numerous venture capitalists sitting on piles of cash and investment bankers with too much time on their hands.
So, like Safeway, who might be the next retailer to find itself in play? While out for dinner recently with a senior retail analyst from one of the big investment banks I was told that his company – along with many others – was starting to take more than a passing interest in Boots.
With its share price continuing to slide – it currently stands at 534p compared with a 12-month high of 732p – there are certainly increasing arguments for de-listing the company and running the thing privately.
The analyst, who prefers to remain nameless (probably to avoid the embarrassment of being known to dine with journalists), reckons that the combination of cheap borrowing, good cash flow from the group’s high street outlets, the fact that it has scaled back its overseas operations and that McKinsey has already done some work on the possibility of offloading the company’s Healthcare International division, all make it an attractive proposition. It is also without a chief executive so has a weakened board at the moment.
On the back of all that, isn’t it a prime opportunity for a VC to get involved and set about extracting some value a venerable high street name that has fallen on hard times?
When asked why his bank hadn’t yet made a move the analyst suggested that they were waiting for a lower share price and that the expectation was that it would not be long in coming.
Well – surprise, surprise – that’s exactly what has happened since we spoke so the only question can be: how long will it be before somebody actually sticks their head above the parapet and places Boots on the M&A chopping block?
Glynn Davis was previously a fund manager in the City, and has since become a business journalist specialising in the retail sector. He regularly contributes to national newspapers and specialist trade publications. email Glynn@busicomm.fsnet.co.uk
