The owner of Boots is in talks to offload a £7bn UK pharmacy chain

(Bloomberg) — Walgreens Boots Alliance Inc. has revived discussions about a possible exit from its UK drugstore chain, Boots, nearly 18 months after calling off the sale.

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The company is in early talks about ways to spin off Boots, which could be valued in a deal at about 7 billion pounds ($8.8 billion), according to the people. It is considering an initial public offering in London as one possibility, the sources said.

Walgreens shares jumped as much as 2.9% on Tuesday, hitting an intraday high in two months. Shares closed down 0.3% to $22.93 in New York trading, giving the company a market value of about $20 billion after falling 39% this year.

Boots’ float would be a big boost for London’s stock market, which has been hurt by a steady stream of companies choosing to list elsewhere. Fundraising from U.K. IPOs has fallen more than 50% this year to about $1 billion, according to data compiled by Bloomberg.

Any process would not begin until next year at the earliest, said the people, who asked to remain anonymous because the information is private. Walgreens reached an agreement in November to offload Boots’ pension risk to Legal & General Group Plc, removing a stumbling block that had complicated previous efforts to divest the business.

Wasted effort

Walgreens invited bids for Boots last year as it sought to increase its focus on North America, where it is adding more health care services. It abandoned that effort in June 2022 after failing to secure a desired valuation for the company amid a turbulent credit market.

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During this latest operation, Indian billionaire Mukesh Ambani’s Reliance Industries Ltd teamed up with Apollo Global Management Inc. To make a bid for Boots, the UK’s largest pharmacy chain. They were competing with a separate consortium backed by TDR Capital and the British billionaire Issa brothers, people familiar with the matter said at the time.

Walgreens could also choose to invite new offers for Boots, although high interest rates would make it difficult for private equity firms to pay top dollar. Deliberations are still at a preliminary stage, and there is no certainty that they will lead to a deal.

A Walgreens representative declined to comment.

Push shift

Walgreens is cutting costs and has hired new CEO Tim Wentworth to try to turn the business around. On Monday, Walgreens’ unsecured credit rating was downgraded to junk by Moody’s Investors Service, which cited the pharmacy chain’s high debt relative to earnings.

Boots operates a sprawling network of more than 2,000 stores across the UK, as well as own brands such as No7 Beauty Co. and operations in a few other countries. Walgreens said earlier this year it would close 300 Boots stores in the UK, especially those in close proximity to other outlets, as it seeks to focus investment on its best-performing locations.

–With assistance from Ryan Gould, Fiona Rutherford, Katie Linsel, Venice Chan, and Swetha Gopinath.

(Updates with closing stock price in third paragraph.)

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