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Boots, Alliance Unichem announce plans to merge

British health and beauty retailer Boots and pharmacy chain Alliance Unichem announced yesterday that they will merge, creating Europe's leading retail pharmacy business.

The new group, to be called Alliance Boots, will have combined sales of over £13 billion (US$22.8 billion), the two groups said in an official joint statement to the London Stock Exchange.

"The boards of Alliance UniChem and Boots announce that they have agreed the terms of a recommended merger to create Alliance Boots, an international pharmacy-led healthcare group," the two companies said.

Alliance Boots -- employing more than 100,000 staff in Britain and Europe -- will comprise just under 3,000 retail outlets, including 2,600 in Britain, with a wholesale and distribution network serving over 88,000 outlets.

Cost savings

The combined group was targeting annual pre-tax cost savings of "at least £100 million" by the fourth full-year following completion of the merger, the statement said.

The deal will give the enlarged company the muscle to compete with supermarkets selling medicines and toiletries at cheap prices -- such as Britain's biggest chain, Tesco, and the second largest, Asda, which is owned by US retailing giant Wal-Mart.

The merger, which followed weekend speculation, was structured as a "merger of equals." It will see Boots shareholders holding 50.2 percent of the combined group and Alliance Unichem shareholders 49.8 percent.

Boots said it would return to shareholders through a special dividend all post-tax proceeds in excess of £400 million from the disposal of Boots Healthcare International, its over-the-counter medicines business that was put up for sale in April.

It is proposed that Boots chairman Nigel Rudd will chair the new entity, while Richard Baker, Boots' chief executive, will take the chief executive role.

Stefano Pessina, Alliance Unichem's deputy executive chairman and 32-percent shareholder, will take the same role at the combined group, as will group finance director George Fairweather.

`Opportunities'

Commenting on the proposed deal, Baker said: "With Alliance UniChem's distribution network and proven international expertise, Alliance Boots will also have exciting opportunities to take the trusted Boots brand and products into new markets."

Stefano Pessina added: "The fast evolving healthcare markets around the world provide the new group with a broad international stage upon which we can deploy our combined operational and management skills."

The majority of Boots shops are on the high street in Britain or in shopping centers, while Alliance UniChem has pharmacies based close to doctors' surgeries.

Analysts believe that the dominance of a combined company in some local areas could draw the attention of several competition authorities.
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