Boots, Alliance UniChem to merge in #7bn deal

Boots Group, which operates a pharmacy chain and healthcare business in Ireland, will announce a £7 billion stg (€10.27 billion) merger between with Alliance UniChem today.

Barring any last-minute hitches as the management teams and their advisers thrash out the fine print, the two healthcare retailers will at 6pm today signal their intention to create a 2,500-store giant with combined sales of over £14 billion.

"We're on track for an announcement on Monday morning," one source close to the deal said last night.

Alliance UniChem is a pharmacy wholesaler and retailer with operations in 12 different countries, including the UK. Its other territories are in Europe and the Middle East.

Boots has 84 pharmacies in Ireland. It also operates a division of its Boots Healthcare International (BHI) here, which manufactures and distributes non-prescription products like Nurofen, Strepsils and Clearasil.

It is negotiating a separate sale of BHI, which is expected to raise between £1.4 billion and £1.5 billion. Suitors are said to include pharmaceutical giants Pfizer and GlaxoSmithkline.

Most of the estimated £1 billion gain from this will be returned to Boots shareholders, but the company is likely to retain some of it.

Both Boots and Alliance UniChem have declined to comment, but several sources close to the deal have confirmed the broad details of the merger, which would still be subject to shareholder approval.

While the deal will be billed as a merger of equals, Boots chief executive Richard Baker is expected to take the helm at the new company, while Boots chairman Nigel Rudd will continue as chairman.

A further two executive directors will be taken from existing Boots management, with four coming from Alliance UniChem.

Stefano Pessina, the executive deputy chairman of Alliance UniChem who owns 32 per cent of the company and will have a 16 per cent shareholding in the combined group, is likely to retain his current position and could be influential as an acknowledged safe pair of hands in business integration.

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

Although Boots has a significantly greater market value - £4.4 billion versus £3.1 billion for Alliance UniChem - shareholders in the two companies will each be offered 50 per cent of the shares in the merged entity.