Kohlberg Kravis Roberts & Co said yesterday it had raised its bid for Alliance Boots PLC, buying millions of shares at a price which values the company at about ?11 billion (US$22 billion).
The private equity company, which has teamed with Alliance Boots' deputy chairman Stefano Pessina, said it had acquired 49.7 million shares at 1,139 pence (US$22.80).
That was above its previous offer of 1,090 pence per share. Alliance Boots shares closed on Monday at 1,126.5 pence and opened yesterday at 1134.5 pence, up 0.7 percent.
The KKR-Pessina stake in the company represents about 21 percent of the shares, including the 6.3 percent stake now held by AB Acquisitions, the takeover vehicle.
The move followed the opening of a bidding war last week as a rival consortium including private equity group Terra Firma Investments, medical charity the Wellcome Trust and banking group HBOS PLC made an "indicative offer" worth ?10.8 billion.
As many as 2,600 of Alliance Boots stores are in Britain and its status as a household name has prompted some debate about the merits of ownership by private equity for major British companies.
Nick Bubb, an analyst at Pali International stockbrokers, believed that the Terra Firma group would now back down.
"It is possible that they will respond with a 1,165 pence offer, but the price is getting steep and there must be no more than a 10 percent chance," Bubb said.
"This is a very, very full price and could be the end of the game," said Richard Ratner, analyst at Seymour Pierce.
KKR, which has conducted three of the world's four biggest leveraged buyouts, will target Japanese technology, retail and financial services firms that seek to expand overseas.
"We can be very helpful to Japanese companies which want to expand abroad," George Roberts, co-founder of the firm, said at a Tokyo press conference. KKR also aims to tap opportunities to work with the increasing number of Japanese firms seeking takeovers in other markets, he said.
KKR opened its first Tokyo office in 2005 to seek corporate assets in the world's second-largest economy. The 31-year-old firm is making its first Japanese investment next month, buying a ?20 billion (US$168.7 million) stake in Orient Corp, a credit card firm being rescued by a group led by Mizuho Financial Group Inc.
Takeovers in Japan are off to a record start this year as the country's economic recovery continues and large cash balances and low valuations draw overseas buyers. Acquisitions involving Japanese firms jumped 13 percent from a year earlier to US$52 billion in the first quarter of this year.
Adoption of new merger rules next month will let overseas firms buy local assets using Japanese subsidiaries as a takeover vehicle.
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