Boots as we still think of it is no more

April 21, 2016

Boots, one of the UK’s venerable and iconic companies, has been the subject of two takeovers since 2007. The company appears to have retained public perceptions of its brand on the high street. Recent allegations against the parent company, Walgreens Boots Alliance, may be threatening its corporate reputation

The breaking story in the US concerns subpoenas concerning the corporate relationship between Walgreens Boots Alliance and a blood-testing company Theranos.

In the UK, the news focus is quite different. The Guardian broke the results from an investigation of mis-use of government funds by the Boots pharmacy operations:

Managers at Britain’s biggest pharmacy chain were found to be directing their chemists to provide medicine-use reviews (MUR) to customers who didn’t need them, in order to claim public money from the NHS (National Health Service) which pays £28 for each MUR, which is carried out by a pharmacist and intended to give patients professional advice on health, diet and how best to manage their medicines.

The Guardian has also seen a recent unpublished survey by the trade union, the Pharmacists’ Defence Association (PDA), to which more than 600 Boots chemists – more than one in 10 of the entire company’s pharmacists ­– responded. Asked “how often do you believe financial cutbacks imposed by your main employer have directly impacted upon patient safety”, over 75% of Boots chemists said that was true “around half” or more of the time. A number volunteered complaints about being “pressurised into conducting MURs whether or not patients are eligible to receive the service” and “Boots keeps asking me for more MURs”.

As subscribers to LWD will know, we have followed the fortunes of the iconic company over two takeovers in the last decade.

The first takeover (2007)

The first takeover in 2007 was seen as a bloodless coup:

Cherished British Drug company Boots merges with European partner, whose wealthy owner, Stefano Pessina, becomes deputy chairman in the new company, Alliance Boots.

The amicable arrangement suggested that in any leadership transition, Mr Pessina would be a cuckoo in the nest. In short order, chairman Sir Nigel Rudd resigned. further friendly discussions were followed by a takeover by private equity firm KKR. The move was presented openly as a vehicle which would install Pessina as its main driver.

KKR and Stefano Pessina had made it known that they wanted to keep the top team intact. But for all the continuing expressions of good will, the inevitable was to happen.

Thursday July 12th 2007, Richard Baker decided to accept a severance deal that would be worth some £10 million. It seems as if they made an offer for him to stay, or decline with honour

The second takeover (2014)

The second takeover is far from complete. This time it is with the mammoth American firm Walgreens, and was initiated in 2014

 

Walgreens Boots Alliance, has the new Nasdaq label WBA. [not to be confused with WBA, aka The Baggies, or West Bromwich Albion, another venerable brand in England, and a midlands- based Football club.] The merger was suggested to have been imposed on Walgreens by impatient shareholder activists.

The change had more executive bloodshed on the Walgreen side. The veteran Stefano Pessina of Boots Alliance again became the most obvious winner, just as he was when he engineered the Merger of Boots with his own Swiss-based operations earlier. The financing of the deal cost Walgreens five billion dollars plus shares.

National and International Issues

In the UK, liberal regulations encourage international takeovers, where investment and efficiency gains are prized until collateral damage to employees becomes contentious.

Only then is the rhetoric of corporate social responsibility really tested.

The case of Tata steel is still rumbling on. The Indian conglomerate Tata, hailed as a saviour of the aging British Steel Industry, announced closure of its UK operations. Tataa became the scapegoat for closures resulting from the global over-production of steel.

So far, ‘Boots the chemist’ has retained its positive image in the eyes of the public, long after Boots as a corporate identity exists as little more than a convenient product brand.  (Compare the national standing of Cadburys, another mythical beast masquerading as a much-loved national manufacturer of chocolate goodies).

Notes

I still think ‘Boots’ not ‘Alliance Boots’, just as I think ‘Manchester Business School’, when the new name is the ‘Alliance Manchester Business School’.

Ideas and cultures hang around a lot longer than brinks and mortar.


Who wants to hire leaders of failed banks? More organizations than you might think

June 7, 2009
Andy Hornby

Andy Hornby

Leaders of failed financial institutes have been widely castigated, and their competence challenged. But some remain in high demand. Andy Hornby is a case in point

This week, Alliance Boots was reported to be close to appointing Andy Hornby as CEO of its successful international business.

Alliance Boots is Europe’s largest wholesale and retail player in the pharmaceutical industry and employs 115,000 people. It is currently run by the Italian billionaire Stefano Pessina, who holds the post of executive chairman. “Alliance Boots confirms it is currently engaged in discussions with Andy Hornby, who is a leading candidate for the role,” the firm said in a statement.

Mr Hornby, in charge of HBOS at the time of the bank’s near-collapse last autumn, is among several candidates for the post. Before moving to HBOS he spent time in senior posts at supermarket giant Asda.

If we believe the rumours [June 7th 2009] Andy Hornby is back in fashion.

Hornby, formerly of HBOS, remains be one of the more highly regarded of recently deposed financial leaders.

LWD had reported positively on his leadership style after his interview with the BBC’s Robert Peston a few months before the banking crisis reached its peak (or do I mean trough?).

We had been tracking his story since the time that Mr Hornby had been assessed as one of the high flying British business leaders. He had enjoyed considerable success in his appointments Asda and Blue Circle, and then at the Halifax building society. He had also gained particular credit for the way he handled the Halifax merger with the Bank of Scotland, although his style was seen as less dynamic than that of more entrepreneurial banking leaders.

What’s going on

There are several interesting questions arising from the story of the re-emergence of Mr Hornby as a credible leader. Why should he now be the ultimate choice as its leader by a successful firm such as Alliance Boots? What explanation might be offered for the rumored appointment?

I believe there is a clue in the information provided above. Whatever explanation you might come up with, it helps knock on the head simplistic beliefs that all discredited banking executives have no further prospects of gainful employment in senior leadership positions.


Alliance Boots shows some transparency

June 10, 2008


Alliance Boots show a strong profit rise, after the friendly takeover of Boots by Steffano Pessina. The news also indicates a calculated tranparency rare for traditional Private Equity ventures

The story of the profit rise at Alliance Boots was found in The Times on line and picked up by the agencies. According to The Times, Alliance Boots

will this week [June 9 – 13, 2008] buck the gloom on the high street when the pharmacy chain reports a 20% increase in trading profits during its first year as a private company.

Stefano Pessina, the executive chairman who teamed up with Kohlberg Kravis Roberts to mount the £12.4 billion buyout, will announce on Tuesday a £770m profit for the 12 months to March.

The performance gives Pessina the opportunity to face down critics who said he overpaid for Alliance Boots, which has 1,500 UK shops and distributes medicines across Europe. Banks that financed the deal – Europe’s largest leveraged buyout at the time – were forced to discount its £9 billion of debt in order to sell it on.

Higher profits were achieved by driving costs from the business, which was created a year earlier from the merger of Alliance Unichem with Boots. Sales at its largest stores are proving the most resilient. However, questions remain over whether it can maintain such momentum in a stuttering economy.

The story so far

In an earlier post Leaders We Deserve reported

Cherished British Drug company Boots merges with European partner, whose wealthy owner, Stefano Pessina, becomes deputy chairman in the new company, Alliance Boots.

The amicable arrangement suggested that in any leadership transition, Mr Pessina would be a cuckoo in the nest. In short order, chairman Sir Nigel Rudd resigned. further friendly discussions were followed by a takeover by private equity firm KKR. The move was presented openly as a vehicle which would install Pessina as its main driver

KKR and Stefano Pessina had made it known that they wanted to keep the top team intact. But for all the continuing expressins of good will, the inevitable was to happen.

Thursday July 12th 2007, Richard Baker decised to accept a severance deal that would be worth some £10 million. It seems as if they made an offer for him to stay, or decline with honor. In an interview with he says

“Stephano is a gentleman. He has been as good as his word with me every step of the way..I am confident about the future of the company ..I have looked everyone in the eye at Nottingham [corporate HQ] and told them that”

.

Another top retail executive, Scott Wheway, is also leaving, again in an amicable fashion.

Not too difficult to predict

The story has been followed in earlier posts. It struck me that in the original merger between Boots an Alliance, the new board had a majority of former Boots executives. But the Alliance side was the more profitable, and Stephano brought with him a sizable shareholding and considerable personal wealth.

It was not difficult to predict what would happen. I noted earlier this year that

If takeover is successful, I am not expecting many of actual board members to retain their positions.

And so it has come to pass. Not brutally. But Pessina has enough power to be magnanimous. Mr Baker may not have had much temptation to stay on when the alternative was a £10 million incentive to leave, with more chances of securing a new leadership role elsewhere.

Leadership lessons

I’m not sure of the leadership lessons here. Perhaps it is that self-made billionaires are not all ego-crazed narcissists. Maybe absolute power is not always accompanied by absolute ruthlessness.

The initial deal was done a few months before financial markets went into melt-down. Alliance Boots seems to be supporting the enthusiasts of free market capitalism in the robust form of Private Equity interventions.