Boots, Alliance UniChem deal to create giant

British pharmacy groups Boots and Alliance UniChem are to merge to create a 2,600-store healthcare giant with sales in excess of £13 billion (€19.14 million).

The merger, which will create a British drugstore giant that will be four times as large as its nearest competitor, could have implications in the Irish pharmacy market where Boots currently has around 50 stores in the Republic, supplied by the Celesio-owned Cahill May Roberts.

Although Alliance Unichem has no presence in the Republic, it acquired the 50-strong Baird pharmacy chain in Northern Ireland last May. It is supplied by Sangers, a unit of Celesio's main rival, United Drug.

According to NCB Stockbrokers, the merger could "change the landscape in the retail pharmacy and wholesale sector in Ireland". Analysts are wondering whether the merger will prompt the enlarged group to opt for a single supplier while the move could also trigger further retail expansion by Boots in the Republic.

United Drug already has a relationship with Alliance Unichem through their contract distribution joint venture, UniDrug, in Britain although this is not expected to be affected by the merger.

Barring any counterbids, the merger is subject to approval from shareholders and competition regulators. The deal will be billed as a merger of equals but effectively it is an acquisition of Alliance UniChem, with Boots chief executive Richard Baker taking the helm at the new company, to be known as Alliance Boots, and Boots chairman Nigel Rudd continuing in that role. Boots shareholders will have 50.2 percent of the merged group when the deal is completed in 2006.

The merger will see the powerful Boots brand allied with the distribution expertise and network of Alliance UniChem, which is Europe's second-largest pharmacy distributor and has operations throughout western Europe and the Middle East.

Boots has a significantly greater market value - £4.4 billion versus £3.1 billion for Alliance UniChem, but the deal will not include the sale of Boots Healthcare International (BHI) which is currently in progress.

(Additional reporting: Reuters)