Market Loop - Boots receives £5bn takeover offer

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10th June 2022

Bite-sized business news from the UK and beyond
Good morning Yesterday the Hertfordshire town of St Albans was the venue for the first event in the controversial Saudi-backed LIV Golf Invitational Series. A growing list of big name players are ditching the incumbent US PGA tour in favour of the big bucks on offer for LIV events. Just how big are the payouts?  Former world number 1 Dustin Johnson has reportedly been paid $125m just to take part — effectively doubling his career earnings for signing a dotted line.
Today's stories
  • Boots receives £5bn takeover offer
  • Greenwashing allegations hit big corporations
Boots receives £5bn takeover offer

What happened?
Reliance Industries, the multinational conglomerate owned by Indian billionaire Mukesh Ambani, has teamed up with US private equity firm Apollo to make a £5bn bid for Boots. According to reports, if successful, Reliance plans to expand the pharmacy chain in Asia.

The 173-year-old high street retailer has drawn interest from some of the biggest investors in the world. Boots was put up for sale by its American health group owners Walgreens in January and was originally expected to fetch for as much as £6bn.

The Reliance-led offer is the latest since March when CVC and Bain Capital, two of the world’s biggest private equity groups, dropped out from the auction process over second thoughts on valuation.

Walgreens has owned Boots since 2014 and rumours began circulating last October that it was considering selling the chain or listing it on the stock market, so it could focus on healthcare in its home market.

Boots has had a challenging few years:
  • Consumer behaviour has accelerated towards online shopping during the pandemic and owning a business with such a vast store portfolio – many in need of refurbishment or in quiet high streets - could put a dampener on the value. 
  • It has been gradually losing market share to supermarkets and discount retailers, for its core toiletry products, and to online retailers for beauty products.
But investors are thought to be interested in developing Boots’ ecommerce beauty division and striking partnerships with the NHS to provide more healthcare services.

Other buyers could still be in the running. Among them is Asda owner TDR Capital who is reportedly working on plans to integrate Boots into the supermarket chain’s stores if successful.

Boots is one of the biggest retailers in the country and one of the biggest private sector employers with a footprint of 2,200 stores and 55,000 staff. The sale would be among the most major consumer retail deal for years. Given its close links to providing NHS services, a sale would also draw a lot of attention from the government and public.
Other stories to keep you in the loop
  • Train drivers to join other rail workers on strike
  • John Lewis unveils locations for hundreds of new rental homes
  • Apple sidelines Goldman Sachs and goes in-house for lending service
  • Eurozone interest rates set to rise for first time in 11 years
  • Competition watchdog confirms £7bn takeover of Morrisons supermarket can go ahead
  • UK shoppers cutting back even on essentials, warns Poundland owner
Greenwashing allegations hit big corporations

What happened?
The past week has seen high profile organisations hit by allegations of greenwashing, that’s when companies mislead investors about its environmental, social and corporate governance — or ESG.

Federal agents raided the Frankfurt HQ of Deutsche Bank as Germany’s biggest bank adding greenwashing to its long list of scandals
The bank’s asset management unit, DWS, has been under scrutiny since its former chief sustainability officer alleged last year that it misleadingly badged €459bn assets as ESG “integrated"  which regulators are now investigating.

Football’s world governing body, FIFA, was accused of greenwashing this year’s World Cup. Host nation Qatar said that the tournament would be ‘carbon neutral’ but a new report by Carbon Market Watch attributed that claim to "creative accounting." 

For example - the carbon footprint of six newly-built stadiums was calculated by dividing the number of the days in the tournament over the entire estimated lifetime of the stadium. The only problem, in the eyes of Carbon Market Watch, is the stadiums are being purpose-built for the World Cup, and will likely be collecting dust in the years to follow. The climate watchdog estimates the true emissions are being understated by a multiple of eight.

The fashion industry was also hit with allegations. Industry publication, The Business of Fashion, released its annual survey of sustainability efforts at the 30 biggest listed companies and found that no company scored more than 49 out of 100 on measures such as emissions, waste, chemicals and transparency.

The bottom line: As investors, consumers and governments start to care more about ESG matters, organisations will have to work extra hard to prove their ESG credentials.
Stat of the day

Yesterday the average cost of filling a UK family car with petrol hit £100 for first time
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