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Boots hints at broader retail M&A fallout

Michael Flaherty
May 27, 2022
Illustration of a knife-like downward trend line slashing through a grid

Illustration: Sarah Grillo/Axios

A consortium of Boots bidders is weighing whether to back out. Kohl's suitors are prepared to lower their offers. This week did not offer a positive picture for consolidation moves in the retail sector.

Why it matters: It's a tough time to sell a retailer. The ability for Boots, Kohl's, and any other retail company to get across the M&A finish line is getting harder, due to a confluence of economic factors, namely inflation and falling market values.

What they're saying: "It's not a financing issue," a veteran M&A lawyer tells Axios.

  • "If you're looking to buy a retail company, you're saying 'my assumptions three, six months ago, were fundamentally wrong.' This is now a much riskier investment if you're looking to buy something in this sector."
  • The lawyer did not want to be named due to client relationships.

Driving the news: Bloomberg reported yesterday that the Issa brothers, bidding together with TDR Capital, are considering dropping out of the bidding for Walgreens Boots Alliance’s international arm due to disagreements over price.

The bottom line: Every M&A situation is unique. The Boots business is focused in the United Kingdom, where the financing and economic climate is worse than in the U.S. The parent company is losing bid tension by the day.

  • For Kohl's, the company was pushed into a sale by activist hedge fund Macellum so, in the end, if the bids keep dropping, there's a clearer path to pull the plug and go it alone.
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