Walgreens Boots Alliance and the Rise and Rise of Stefano Pessina

January 21, 2015

As 2014 drew to a close, the second stage of a merger took place incorporating the American convenience stores group Walgreens with what was originally known as Boots the chemist of England. Boots had already morphed into Boots Alliance at the time of the merger

In the new year [January 15th, 2015] the new company announced its first dividends. The histories of the brands can be found in the excellent website of the new company. It positions itself as a first global-pharmacy led health and well-being company. This strap line may not be pretty but it has a rather ponderous truth reflected in the brands of Walgreen stores of America and the revamped Boots stores in the UK. The stores also hint at shared values and reasonably compatible cultures which could go some way to avoiding the pain that accompanies any merger.

WBA is not a football club

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.

Winners and Losers

The change had more executive bloodshed on the Walgreen side. Unsurprisingly, the veteran Stefano Pessina of Boots Alliance 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. LWD subscribers will have followed the commercial rise and rise of Stefano Pessina in earlier posts in which I noted:

In the original merger between Boots and 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. Pessina had enough power to be magnanimous. Mr Baker [a departing Boots executive] 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.

Image

The image was one taken as I was visiting a Walgreens in Buffalo, NY last year. It’s not much to do with the merger, unless you read something into the caption …


Porsche Volkswagen merger edges forward

August 14, 2009

VW-Logo

The long-awaited merger between Porsche and Volkswagen edges forward. The complexities have additional national features

Mergers tend to reveal and emphasise differences in the cultures of the participating organizations.

A few years ago , I had some personal involvement with a merger between two institutions located close physically and professionally. The outcome for several years was not so much the expected two sub-groups within the new extended organization, but six including two smaller groupings acquired to strengthen the core merger.

Mergers are often said to require around five years for the legacy cultures to settle down, despite attempts by the leadership of the new organisation to establish a shared vision.

In the UK, the diverse cultures of Cadburys and Schweppes remained for at least that long, in an uneasy marriage of the more traditional with the swashbuckling. The two cultures were still recognisable two decades later, and contributed to the logic of CS acquiring the ailing Dr Pepper/Seven Up group, and subsequently demerging the fizzy bits into the wonderfully named Dr Pepper Snapple Group

Porsche Volkswagen makes a classic business case study. I leave its complexities to those more involved in that venerable Business School approach. Here I will concentrate on exploring the map of the merger for its leadership implications.

It promises to be a titanic struggle. The two cultures feature most obviously in the strong brands symbolising the two institutions.

Background

Leaders we deserve has been noting the possibility of a merger since 2007 when Porsche appeared to be the more powerful of the two protagonists.

Dr Ferdinand Porsche designed the original Beetle in 1936, and his grandson, Ferdinand Piech, is chairman of VW and the controlling shareholder in Porsche. Wendelin Wiedeking, chief executive of Porsche, is a member of the supervisory board of Volkswagen …In November 2007, rumours suggested that Porsche intended to acquire VW, and incorporate the models under the Porsche brand through a holding company. The powerful unions at Volkswagen sent a signal of discontent, with work stoppages, including 40,000 workers at the main Wolfsburg plant [Wednesday Oct 30th. 2007]

At the time I commented in the same blogpost

My suspicion is that plans towards securing that dynastic merger are in place. Whether the happy day is near remains to be seen.

There were a few twists and turns to the story over the next two years. A little matter of a deep global recession and financial crisis. Some complex moves involving share acquisitions, and governmental background interventions.

The BBC observed

Over the past year [2008-9] Porsche built up major debts to get a 51% stake in VW, only to fall short of the required 75% when it could not raise more funds. Porsche’s failure to buy VW saw the firm’s former chief executive Wendelin Wiedeking and financial director Holger Haerter resign “with immediate effect” last month [July 2009].
Porsche will now effectively become the 10th brand in the VW family, joining the likes of Audi, Seat and Skoda. However, VW has pledged to maintain Porsche’s “independence”.

Independence

Independence. Ah, yes, in the sense that it has been a ‘friendly’ merger, and not, as the cynical are inclined to say, a bloody takeover.

The Cultural Turn

So what of the two cultures? To an outsider, Volkswagen is more than able to accommodate Porsche as a coherent brand such as it did with Audi. It has done a good job in that respect with Seat and Skoda. On the other hand, it might be that the more local historical rivalries will prove more difficult than those posed with international acquisitions. But even as I write, I see that the notion of merger is becoming blurred into the vocabulary of a takeover.

We will have to wait some time to see how this turns out for the organizational culture of the VW organization.


VW Law. All in the family as Porsch/VW consider wedding plans

November 1, 2007

porsche-model.jpg

Update [Aug 2009]

[This post offers background to the eventual merger between Porsche and Volkswagen. The original post follows ]

No-one was surprised when the so-called VW law was declared illegal. The ruling had been anticipated for a long time by Porsche through skillfully increasing its stake in VW. The stage was set for an official announcement of a merger between two German industrial dynasties which already had close family ties

European commentators had been discussing the merger for some while, as the so-called VW Law was tested in the courts. The general view was that the law contravened EU principles on competition grounds. The possibility of non-German control would encourage a ‘friendly’ takeover, with Porsche a front-running candidate.

There are strong links between the companies

Dr Ferdinand Porsche designed the original Beetle in 1936, and his grandson, Ferdinand Piech, is chairman of VW and the controlling shareholder in Porsche. Wendelin Wiedeking, chief executive of Porsche, is a member of the supervisory board of Volkswagen.

Anticipating the ruling will go against the VW Law after the advisory opinion, fellow German automaker Porsche AG increased its holding in Volkswagen to 31 percent while Lower Saxony raised its number of shares to 20.36 percent. That means the bloc of Porsche and Lower Saxony can now stop any takeover themselves with more than 51 percent combined

Frits Bolkestein was the EC commissioner for the internal market, and had no doubts about the ruling. Writing in The Financial Times, he points to Article 56 of the Treaty on the Economic Community, which states that

“All restrictions on the movement of capital between member states and between member states and third countries shall be prohibited.” This is one of the four fundamental freedoms of the European Union the freedom of movement of capital, movement of goods, services and persons.

Rumors of wars

There is a case for stating that Germany demonstrates an alternative mode of capitalism. The much-lauded strength of its industrial sector is backed by a complex governance system. Funds tend to be provided by banks rather than the financial institutions of the city. News seems to trickle through to the financial press, increasing the proportion of speculative comment over hard facts.

In November 2007, rumors suggest that Porsche intends to acquire VW, and incorporate the models under the Porsche brand through a holding company. VW declines to respond to such rumors. The powerful unions at Volkswagen sent a signal of discontent, with work stoppages, including 40,000 workers at the main Wolfsburg plant on Wednesday October 30th.

What’s going on?

Shares in VW have moved steadily upward this month. News coverage in the rest of Europe has been low. My suspicion is that plans towards securing that dynastic merger are in place. Whether the happy day is near remains to be seen.