Alliance Boots on Tuesday became the first FTSE 100 company to fall to private equity after KKR, the US private equity group, and Stefano Pessina, the group's executive deputy chairman, launched an £11.1bn knock-out bid for the health and beauty group.
A rival consortium of Terra Firma, the Wellcome Trust and HBOS conceded defeat on Tuesday afternoon.
The KKR-Pessina offer marks the largest buy-out in Europe to date. It values Alliance Boots at a 4.5 per cent premium to their original £10.90 a share offer, recommended last week by Sir Nigel Rudd, Boots' chairman, and his board. It is 40 per cent above the price at which Boots shares were trading before the approach.
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Earlier, KKR had raised its stake to 10.5 per cent after buying an additional 40m Alliance Boots shares at £11.39 in a "dawn raid" on the market early in the session on Tuesday. Combined with Mr Pessina's holding, that took the bidders' stake up to 25.6 per cent.
The acquisitions by KKR follow a similar move by the private equity group late on Monday, when it snapped up 6 per cent - or 49.7m - of Alliance Boots shares, also at £11.39.
Terra FirmaAlliance BootsThe two moves trumped Terra Firma's indication that it was prepared to pay £11.15, or £11.26 including a £105.9m break fee, for the company.
"Boots is a critically important national institution, and we are naturally disappointed not to be able to execute the bold vision we had for the company and its critical role in the provision of healthcare in the UK," Terra Firma said in a statement.
Alliance Boots said it was recommending the revised £11.39 a share offer.
The price represents a a victory for Sir Nigel, who was keen to seal a good deal for his shareholders. His efforts to generate an auction for the group, which has 3,100 stores and supplies more than 125,000 pharmacies and hospitals with drugs, were stifled by his deputy who was also Alliance Boots' largest shareholder.
Shares in Alliance Boots were trading 5½p lower at £11.21 in afternoon London trading.
The KKR victory comes less than a month after a consortium led by CVC, another private equity group, ended its attempt to buy J Sainsbury, the UK's third largest retailer.
For Guy Hands of Terra Firma this will prove a setback. Mr Hands had hoped to build a powerful force in healthcare with his partners Wellcome Trust, the biggest charity in the UK, and HBOS.
Reports had suggested Mr Hands was also considering a bid for Bupa's hospitals in the UK in a deal that would have expanded his interests across drug retailing, distribution and private hospital provision.
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