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Walgreens Boots Alliance on Tuesday scrapped its plan to sell its UK high street pharmacy chain, Boots, citing “unexpected and dramatic change" in the global financial markets since launching the sales process in January. 

The American health-care group had been in talks with a consortium between Reliance Industries and Apollo Global Management for over £5 billion ($6.1 billion) sale of Britain’s biggest pharmacy chain. 

The firm has put its Boots business up for sale after announcing a strategic review in January as the second-largest US pharmacy chain renewed its focus on the domestic healthcare.

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," Walgreens said in a statement. 

On decision to retain the business

The recent strong performance of Boots, and its key No7 beauty brand, is also behind the decision to retain the business, the company added in the statement. 

The 173-year-old Boots business includes 2,200 stores in the UK, including pharmacies, health and beauty stores.

The company sold its distribution business for $6.5 billion to US drug wholesaler AmerisourceBergen last year.

The Boots sale was considered a litmus test for dealmaking in the UK with credit markets becoming increasingly fragile. 

The easy financing conditions that supported a series of debt-fueled takeovers of British companies last year have mostly come to an end. 

Banks have been cutting their exposure to leveraged loans for risk of being saddled with debt they can’t then sell on to investors. That’s cast a shadow over at least $25 billion of transactions in Europe.

This year, banks have run into problems offloading £6.6 billion of debt tied to Clayton Dubilier & Rice’s take-private of UK supermarket chain Wm Morrison Supermarkets. 

The focus is now on how the financing will come together for deals including the possible £5 billion sale of UK gas station operator Motor Fuel Group. Meanwhile, Reckitt Benckiser Group has been struggling to attract bidders for its $7 billion infant nutrition unit. 

Reliance-led consortium frontrunner to buy Boots

The Reliance-led consortium had been the frontrunner to buy Boots although the amount they offered was still short of the valuation of about £7 billion that Walgreens had been seeking initially. 

Their main competitor in the bidding was a consortium of Britain’s billionaire Issa brothers and TDR Capital, although the race between the two lost steam as financing markets became weighed down by concerns around inflation and the war in Ukraine.

Boots has also been slow to catch up with online shopping, just one of the areas where investment is needed. There are also billions in pension guarantees that would have to be taken on.

“The board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximize shareholder value for these businesses and across our company," said Walgreens Chief Executive Officer Rosalind Brewer.

Walgreens had cut jobs, suspended share repurchases and closed some of its UK-based Boots stores to save costs and revive profit growth that took a major hit as the COVID-19 crisis hammered sales at its stores and pharmacies in 2020.

Walgreen shares fell nearly 3% to $41 before the bell.

This story has been published from a wire agency feed without modifications to the text.

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