‘It might be gutted' – Boots braces for dose of private equity's bitter medicine

The Guardian

20-04-2025

'We've had several rounds of cost-cutting and it could happen again,' says a Boots worker. Fears are running high as the Nottinghamshire-based chemist prepares to change hands – perhaps twice in quick succession.
The US private equity firm Sycamore Partners is close to finalising a $10bn (£7.8bn) deal to take over the listed US owner of Boots, Walgreens Boots Alliance.
Experts say Sycamore is then likely to sell off assets, having previously employed this tactic with varying degrees of success at office supplies group Staples and the former owner of the footwear brand Kurt Geiger, Jones Group. It could look at picking off some aspects of Boots – such as stores, property or brands – but is more likely to sell on the entire business.
Boots – which operates more than 1,800 stores and employs about 51,000 people – including about 6,000 at its headquarters in Beeston, three miles south-west of Nottingham – has already been unsuccessfully put on the block by Walgreens at least twice in recent years, with a valuation of as much as £5bn.
The company has changed hands several times in the past 20 years. After a merger with Alliance Unichem in 2006, the combined firm was taken over by private equity firm KKR in 2007, before Walgreens first took a 45% stake in 2012 and then completed a takeover at the end of 2014.
But there are concerns now that this latest change of ownership could see the chain of stores, many of which already need more investment in equipment, staff and maintenance, take another hit.
Nowhere is that more keenly felt than in Nottingham, where Boots is the city's biggest private-sector employer and has been a key to its identity since founder John Boot opened a small herbalist store on Goose Gate in 1849. The group has been based at its 112-hectare headquarters site in Beeston since 1927.
One Boots worker says: 'There won't be any regret we are no longer part of Walgreens. We have always been seen as a small part of that group. Before that Boots was Boots.' However, he adds: 'The fear is more stores close or there is yet another round of reducing staff in stores.'
Another staff member says: 'Private equity are in it to make money as quickly as they can and are not really bothered about the consequences.'
On Beeston high street, several locals say they used to work for Boots or have friends and family who still do.
Jessica Stanley, 38, is suspicious of private equity firms 'because they are thinking about shareholder profits and not value of the business to the community. I guess I would be concerned there's a risk the company might be gutted.'
Michelle Aduhene, 50, compares any potential change to the closure of bicycle maker Raleigh's Nottingham factory two decades ago. 'They built the university [on the old factory site] and that brought students, but does it bring money? It's worrying.' She points to the hit local businesses that also benefit from Boots' employees' trade could face.
However, several staff tell the Observer they would be quite relaxed about a new regime as they have already survived a lot of cost-cutting and restructuring under its various owners, including Walgreens. 'It all happens so far up the line it won't affect us,' says one.
The vast Boots campus still hints at a huge empire – but much of it is now rented out to other companies, some buildings lie empty and about 17 hectares have been sold off to builder Keepmoat for redevelopment into housing.
Occupants are continuing to move out. Alliance Healthcare, the owner of Boots's former wholesale arm, announced plans to close its warehouse in Beeston next year, shortly after Fareva – the French owner of Boots's former manufacturing arm, which makes products for its No7, Soltan and Liz Earle ranges – exited late last year.
There are rumours that more of the site could be sold for redevelopment, with Boots apparently assessing its vacant properties, although the company does not confirm this. Some locals feared a big swathe of student housing could be built, but local property experts say it would be tough to sell off large expanses of the site because of its complex nature.
It has several stunning listed buildings – including the art-deco former factory, which is now MediCity, a hub for biotechnology, health and beauty startups which has a number of spaces vacant – and modernist glass monolith D10, which until recently housed Fareva.
With Boots's manufacturing and wholesale businesses already hived off, there are few divisions left that can be easily sold. However, the own-label beauty brands, including Liz Earle and No7, became a separate company about 10 years ago and could potentially be attractive to an international beauty specialist, according to industry experts. The No7 brand is now sold in the US via Walgreens and other retailers, but is also seen as key to Boots's appeal in Britain.
Store closures then would be an obvious way to go – as evidenced by the complete exit of rival chemist chain Lloyds from the high street after it was bought by private equity.
Boots has already closed more than 300 outlets in recent years but it still has a very high number of stores. Any new owner is likely to look closely at the chain's property footprint, given the rising costs of high street retail, the shift of trade to online, and competition from discounters such as Savers, Lidl and Home Bargains.
Over a quarter (27%) of Boots staff surveyed in a poll by campaign group Organise said they feared their job would be less secure and more than a third (36%) said they felt conditions could get worse in the event of a takeover.
As one worker puts it: 'Because the high street is a very uncertain place at the moment, who is going to be looking to buy into a retailer with such a huge high street presence?'
A listing on the stock exchange is seen as unlikely, given the current volatile situation on public markets and scepticism about growth in consumer companies, so a private sale is seen as more likely.
'Boots has improved dramatically in recent years,' says one source who knows the business well, pointing to the chain's greater focus on beauty counters and use of technology to grab a share of the online market.
'But Boots is very hard to grow as it has got such big market share in most of the markets it is in, and is incessantly under attack from emerging market players. As its market share is so high there is almost only one way to go.
'Someone could run it for cash and slowly underinvest in stores but it has been through that already.'
In recent years, the brand has ridden a strong beauty market, reporting a 1.6% rise in sales in the three months to the end of February. Underlying sales at its pharmacies and its retail business, excluding the impact of currency and store closures, both rose about 5%, while Boots.com sales soared 20%.
But staff say that government contracts for pharmacy services make it difficult to cover costs, and Boots has already reduced pharmacy trading hours in many stores, so counters can be closed even when the rest of the store is open.
Workers also point to poor maintenance in some stores and fewer staff, meaning tills are unattended or increasingly automated, which they say is not good for older shoppers.
Previously interested parties include India's Reliance Industries and restructuring expert Apollo Global Management. CVC, Bain Capital and Asda owner TDR Capital also looked at the group but balked at the then mooted price of at least £5bn.
Stefano Pessina, the entrepreneur behind all the deals at Boots since it merged with his Alliance Unichem business in 2006, is likely to be kingmaker. Those who know him suggest he could keep a stake in Boots and may want to be involved in its future – if he sees a way to make money from it.
Not everyone is so sceptical. Another source who knows Boots well argues: 'There is as much a case for investment as there is for stopping it. It could go more digital.'
With an ageing UK population and the Labour government's increased focus on primary healthcare, where Boots has been increasingly offering services such as obesity clinics and vaccinations, there are new areas for potential growth.
'Boots is thriving, not just surviving, and if it was able to use more of its cash, who knows? There is a change in emphasis in the UK and, on a 10-year view, there is a big opportunity,' says the source.