Buyout of Alliance Boots facing trouble

Source: Exec UK

Date :05/10/2007 16:14:57

The £9 billion private equity buyout of Alliance Boots is facing new problems after the Department of Health’s decision to reduce the amount it pays pharmacies for medicines.

The Department of Health has reduced the amount it will pay British pharmacies for generic medicines purchased on the NHS by £400 million.

It also said it would make a 31 percent cut in the dispensing fees paid to pharmacies for medicines, from 36p to 25p per item – amounting to to an additional £70 million reduction in UK pharmacy profits.

Change

While a change in the Government’s medicine pricing scheme was expected, the reductions are far bigger than expected.

Alliance Boots are Britain’s biggest pharmacy chain with 2,500 of the 12,600 chemists in the UK.

Sources close to the group say that its new owners - the US private equity firm Kohlberg Kravis Roberts (KKR) and the Italian billionaire Stefano Pessina –had planned for a cut of £300 million rather than £470 million.

The reductions will have a substantial impact on profits at the company.

October 5 2007

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