Alliance Boots targets break-up of Sweden’s pharmacy market

May 22, 2009

(From Acquisitions Monthly)

Alliance Boots, the UK pharmacy giant backed by US private-equity group KKR, is understood to have made an expression of interest for some of the chemists that Sweden’s state monopoly Apoteket is selling. The shops are believed to have revenues of close to SEK 20 billion (US$2.6 billion).

The information memoranda were finally sent out this week, with several potential bidders, including Germany’s Celesio, Finland’s Tamro (which is owned by Germany’s Phoenix), plus Oriola and other private equity groups, making expressions of interest.

Alliance Boots declined to comment on what it described as market speculation, but an informed source confirmed the bid interest.  “The idea is to get a good market.  All the big ones – Celesio, Alliance Boots, Tamro, Oriola – are interested, and also private equity firms are also interested,” the person said.

“We’re looking through the material,” a spokesperson for Tamro admitted. “Yes, we have an interest but we have not made any decisions yet.”

“These pharmacies are going to be sold in two big clusters,” explained the source.  “One in a 200-cluster and another in a 170, and a number of smaller clusters with 20 pharmacies in each.”  The person added: “The two big [clusters] are nationwide and the smaller are regional.”

The government will keep 330 branches out of the total 946 and remain a competitor in the market. The auction of the Swedish state’s 616 over-the-counter pharmacy branches is expected to start this summer.

As shown by the sale of Absolut to Pernod Ricard, Sweden’s centre-right party has been busy selling its interests in state-controlled companies to create more competition and boost the coffers.  The government also wants to increase the availability of pharmacies for the consumer.

The deal is not structured to maximise the sale price, but given the other goals, obviously price remains important. A successful auction would be good news for the M&A community, with Nordic deals plunging this year.  They are down a staggering 65 percent by value to $18.8 billion for the first few months of this year to May 7, while the number of deals is down almost 40 percent to 605 for the same period, according to Thomson Reuters data.

Reporting by Adam Durchslag

One comment so far | RSS Comments RSS

anybody know what the valuations of these pharmacies will be?

Posted by Ventura | Report as abusive

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