The boots are for sale to the highest bidder, but where are they all? | Nils Pratley

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Rroll, roll, who wants to buy Boots, a big name in British retail with 170 years of history under their belt? Few people, it seems. Or rather, not much at a price that the seller, the American group Walgreens, had hoped to achieve.

The reported joint bid of just over £5 billion from Reliance Industries of India and US private equity fund Apollo is a far cry from where rumor had suggested the winning line would lie. Advisers had tried to talk the price into territory of over £7billion. There’s still time for the action to heat up (Asda’s ubiquitous Issa brothers and EG petrol fame aren’t officially out yet), but there’s an unmistakable lack of buzz around this deal.

While Boots’ management chirps happily about a “rejuvenated store portfolio and increasingly powerful online presence”, the rest of the world sees a long line of tired shops and a threat of online specialists tackling the high-margin end of the beauty range. The success of the No 7 beauty brand masks many long-standing issues.

Most foreigners’ prescription involves heavy investment to bring the field up to the level of the few flagship stores (particularly in London’s smarter parts) that have had a makeover. Anything is possible with a new owner, but there is also a risk of mixed incentives in a consortium model, especially if Walgreens itself, owner since 2012, is forced to retain a stake. Reliance’s interest may be spurred by thoughts of Asian expansion; Apollo, one assumes, would just want to go in and out within five years in a normal private equity style.

At the right price, buyers should still be able to make decent money. But the contrast to the very competitive 2007 auction for Boots, then a FTSE 100 company, is stark. It turns out that KKR and Italian billionaire Stefano Pessina, the winners on that occasion, made splendid comebacks by selling to Walgreens five years later. This time around, the debate is more like the one heard for most of the 1990s: how to slow Boots’ decline.

AO World CEO too optimistic with his promises

The optimism in the online world of AO fridges, freezers, TVs and laptops continued last summer. Photograph: Tommy (Louth)/Alamy

John Roberts at AO World wasn’t the only specialty online retailer who mistakenly believed the foreclosure trade terms had permanently turned the market in his favor (bow Tim Steiner at Ocado), but he deserves a special mention for this comment from January 2021: “I believe we have seen 10 years of change in 10 months.

The optimism in the online world of AO fridges, freezers, TVs and laptops continued throughout last summer. In the annual report of last July, the group cooed on the prospects in Germany, where its adventure finally seemed to materialize after seven years of effort. Any additional profits in Germany would be invested “to accelerate our growth” and realize a market opportunity “twice that of the UK”. The next step, supposedly, was the rest of Western Europe.

This tantalizing prospect can now be forgotten. The German operation is to be closed, at a cost of up to £15million. German shoppers have returned to stores. Given AO pulled out of their first overseas foray into the Netherlands in 2019, the future looks set in the UK for the foreseeable future. Population densities are more useful here, bettors are more tuned online and the AO brand is established and recognized for its high level of customer service.

Roberts’ sympathetic ambition can still be admired. It was probably just a founder-led company that would have given pan-European expansion a chance in the first place. But spare a thought for the AO employees who were shown a tantalizing prospect at the height of the hype — a bonus program that, as Roberts said, he’d be “proud to tell my mom about.” Success could mean significant sums, such as a year’s salary for warehouse workers rather than “a round of drinks”.

The plan was well intentioned. Unfortunately, the stock price targets that underpin the program now look almost impossible to achieve. In the first year of the pandemic, AO had accelerated from 60p to 400p, making 523p (the baseline) and 941p (for serious money) looking ambitious but believable over five years. With the shares now back at 71p, even the optimistic Roberts may have to concede the goals are a little too far.

For meeting room bonus systems, it is completely forbidden to rewrite objectives in the middle of the game. For a workshop plan like this, an exception would have to be made. It’s not the workers’ fault that the boss was too optimistic.

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