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Boots merger looks likely to go ahead

By Simon Pitman , 10-May-2006

Boots plan to go ahead with a £7bn (€10.2bn) merger with Alliance UniChem look set to go ahead after a last-ditch attempt by European pharmacy retailer Celesio to block the deal has failed.

Boots, which is the largest pharmacy and personal care retailer in the UK, and also has significant operations worldwide, wants to merge with the European-wide retailer and distributor of pharmaceutical and healthcare products in an effort to increase its presence throughout Europe.

Celesio, which is Europe's largest pharmacy retailer, tried to block the merger by asking the UK Competition Appeal Tribunal to re-assess the decision by the Office of Fair Trading to approve the merger. However, the tribunal refused Celesio's application, removing one of the last obstacles to complete the deal.

 

Boots said in a statement that when the preconditions for the merger are satisfied it intends that its merger offer will made by Goldman Sachs to secure all the shares in UK-based Alliance UniChem. The deal will create one of the largest health care and personal care retailers in Europe.

 

In recent years Boots has been doing well to keep its head above water in an overheated and highly competitive market - a problem that is reflected throughout the Western European region.

 

The company reported that its annual sales for the year ending in December were up 1.6 per cent to reach £5.44bn, while sales for the most recent quarter grew by 3.3 per cent, representing a strong performance during the retailer's all-important Christmas trading period.

 

The company's beauty division currently accounts for around 40 per cent of its sales, with the healthcare division accounting for around 45 per cent.

 

Boots has enjoyed some success from its increased move towards premium brands, having signed a number of new contracts with brands representing this category.

 

Toiletries, however, remain one of the biggest areas of challenge for the company, as European-wide, the market remains saturated and extremely competitive, with aggressive discounting driving margins constantly downwards.

 

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