Alliance Boots plc
Alliance Boots plc
Incorporated: 1883 as Boot and Company Limited
Sales: £5.03 billion ($8.75 billion) (2006)
Stock Exchanges: London
Ticker Symbol: AB
NAIC: 446110 Pharmacies and Drug Stores; 424210 Drugs and Druggists' Sundries Merchant Wholesalers; 446130 Optical Goods Stores
Alliance Boots plc is the leading drugstore retailer in the United Kingdom and is also one of the largest pharmaceutical wholesalers in Europe. The company was formed in July 2006 through the merger of Boots Group PLC and Alliance UniChem Plc. Its retail side, which is led by the U.K. chain Boots The Chemists (BTC), includes 2,300 community pharmacies and health and beauty stores in the United Kingdom, 300 Boots Opticians practices in the United Kingdom, and 400 international pharmacies in the Republic of Ireland, Italy, the Netherlands, Norway, Switzerland, and Thailand. Among the stores' offerings are a range of proprietary Boots-owned brands, including Boots, No7, Soltan, and Botanics. On the wholesaling side, Alliance Boots distributes a full line of medicines and other healthcare products to more than 125,000 pharmacies, hospitals, and health centers in 14 countries: the Czech Republic, Egypt, France, Germany, Italy, the Netherlands, Norway, Portugal, Romania, Russia, Spain, Switzerland, Turkey, and the United Kingdom. Among the distributed products is the company's own line of generic drugs, which are manufactured by third-party suppliers and sold under the Almus brand. The history of Boots Group extends back to the opening of a small shop in Goosegate, Nottingham, in 1849, while Alliance UniChem was itself the product of a 1997 cross-border merger of UniChem PLC and Alliance Santé S.A., companies whose roots date back to 1938 and 1976, respectively.
JESSE BOOT, FOUNDING FATHER
Jesse Boot, the founder of the company, was born in Nottingham in 1850, the first child and only son of John Boot and his second wife, Mary. An agricultural laborer by trade, John Boot was much influenced by the ideas of popular medicine then current among nonconformists, particularly those of the disciples of the American Samuel Thompson, whose remedies, based on medical botany, were then enjoying considerable success in Britain. After John Boot's health broke down, he opened a small shop called the British & American Botanic Establishment in 1849 in Goosegate, Nottingham, selling his own herbal and botanical medicines. His death in 1860 left his widow and her two children dependent on the shop for their livelihood, and Mary Boot continued to run the business with the help of her ten-year-old son. Three years later Jesse Boot left school to work full time in the business. In 1871 Mary and Jesse began operating their business as M and J Boot, Herbalists. Six years later, Jesse took full control of the shop.
In the 1870s, rising real incomes allowed the working class to purchase the patent and proprietary medicines of the kind manufactured and sold by Thomas Holloway and Thomas Beecham, displacing the remedies of medical botany. Although the shop in Goosegate continued to sell herbal medicines, young Jesse Boot started to expand the business, first by adding a range of household goods, including groceries, sold at cut prices; an advertisement of the early 1870s claimed more than 2,000 articles in stock. He decided in 1874 to enter the business of retailing proprietary medicines; as he recalled in 1904, he thought that "if he could afford to sell proprietary articles at prices lower than were being charged by the ordinary chemists, there would be a large future before him." Jesse Boot's commercial strategy, the basis on which he built his large and successful business, was to buy in large quantities from wholesalers and to sell at prices well below those prevailing in the town. It won for him the enduring hostility of the established chemists, first in Nottingham, and later in other towns and cities where he opened branches.
Although at first Boot had difficulties both in persuading the wholesalers to supply him with such large quantities and in finding the money to pay them, he secured the support of a number of influential businessmen and professional men in Nottingham, and, following an extensive advertising campaign in the local press, his business grew rapidly. By the autumn of 1877 his turnover had reached £100 a week, far surpassing his own original target of £20 a week. In the following year he opened a new and larger shop, also in Goosegate, and five years later he extended, refurbished, and refitted it.
In July 1883 Boot incorporated his business as Boot and Company Limited, with a nominal capital of £10,000 of which almost a half was fully subscribed, most of it by Boot himself. Incorporation with limited liability could have opened the way for external investment in the business, but Boot chose to keep control in his own hands, offering shares only to a few close friends and associates in the 1880s; for the time being, he continued to rely on the banks for financial backing, and a decade later, when he started to encourage investors, he sold only preference, nonvoting shares. Some of these shares were offered to customers, through the shops, and some to employees, for the cooperative ideal attracted the nonconformist and liberal side of Jesse Boot's character, although at the same time he was determined to keep control of his business.
More significantly at the time, incorporation opened up a new area of business for Boot's shop, that of dispensing prescriptions. In a test case brought by the Pharmaceutical Society in 1880 against the London and Provincial Supply Association, the House of Lords decided, much to the chagrin of the society, that limited liability companies had the right to employ qualified pharmacists or chemists to dispense prescriptions. In 1883 Boot recruited Edward Waring as the company's first pharmacist in the Nottingham store and, with dispensing at half-price, the prescription section was off to a good start.
Our mission is to become the world's leading pharmacy-led health and beauty group. We will seek to develop our core businesses of retail pharmacy and wholesale across the world and become a significant player in many major international markets.
Performance-driven, we will strive to deliver on our promises to shareholders, setting high standards that are recognised as the benchmark by all our stakeholders, inside and outside the Group.
We intend that our brand portfolio will lead the industry (Boots, Almus, No7, Soltan, Alphega, Alvita) and we aim to demonstrate unparalleled expertise in formulating, marketing, selling and distributing our own brands.
We will create a strong shared culture and sense of identity and belonging for our team throughout the Group.
Expansion of the business continued with the opening in 1884 of branches in Lincoln and Sheffield and the start of small-scale manufacturing behind the shop in Goosegate. By 1885 Boot's annual turnover had reached £40,000, but in that year his health deteriorated, and he briefly contemplated selling the business. He recovered, and while recuperating on holiday in Jersey he met Florence Rowe, daughter of a bookshop owner. In August 1886 they were married.
The 1890s saw an ambitious plan of expansion implemented. New shops were opened to extend the company's coverage of England and Wales, and Boot also bought, where he could, small chains of chemists' shops. By the end of 1893, according to the Chemist and Druggist, Boots was then the largest of the company-chemist chains.
Boots and Company was reconstituted in 1888 as Boots Pure Drug Company Limited, which became the holding company for a number of subsidiary companies such as Boots Cash Chemists (Lancs) Ltd., 1899. The size of the company—there were 180 shops by the end of the century—was enhanced when in 1901 Boot bought the Southern Drug Company and the Metropolitan Drug Company, which together formed a chain of more than 60 shops, the largest in the metropolitan area. Between 1901 and 1914 more new shops were opened, bringing the total to 560 in 1914, including prestigious sites in Princes Street, Edinburgh, in 1911 and Regent Street, London, in 1912.
While pharmaceuticals and dispensing remained the core of the business, the range of merchandise retailed also widened, particularly in the larger shops, which were closer to department stores, and as the company tried to widen its appeal to attract middle-class customers. Florence Boot's experience of retailing in her father's bookshop gave her a direct interest in the business, resulting in the introduction of departments offering stationery, books, artists' materials, and gifts that proved popular and successful and remained in her charge. Around 1900, Boots Booklovers Libraries were established and cafés or tearooms were installed in some of the larger stores; both these innovations proved a success in terms of customer appeal.
By 1892 manufacturing, which had started in a small way behind the shop, occupied the whole of a former cotton mill in Nottingham, and the interest always taken by Jesse Boot in the design, fitting, and appearance of the shops led to the establishment and growth of a building and shopfitting department. A printing department to serve the company's needs opened in 1890. The continued growth of the business was reflected in its rising sales, which passed the £2 million mark in 1911 and reached £2.5 million in 1913.
- John Boot opens a small shop called the British & American Botanic Establishment in Goosegate, Nottingham.
- Jesse Boot, son of the founder, takes over control of the shop.
- Boot incorporates his business as Boot and Company Limited and hires his first pharmacist.
- Company is reconstituted as Boots Pure Drug Company Limited.
- Boots sells controlling interest in his company to American Louis K. Liggett and his Rexall group of U.S. drugstores.
- Company goes public when 25 percent of its shares are sold on the London Stock Exchange.
- Group of British investors purchase the shares held by American interests.
- Group of retail pharmacists in London form UniChem Limited, which initially focuses on wholesaling pharmaceutical products to independent pharmacies.
- Boots acquires Timothy Whites.
- Boots assumes a new name, The Boots Company Ltd.
- Alleanza Salute, forerunner of Alliance Santé S.A., is founded in Naples, Italy.
- Boots is renamed The Boots Company PLC.
- Boots Opticians chain is launched.
- Boots acquires the Ward White group of retail businesses.
- UniChem acquires Moss Chemists.
- Boots Pharmaceuticals is divested.
- Boots opens its first store in the Republic of Ireland.
- UniChem and Alliance Santé merge to form Alliance UniChem Plc.
- Boots divests the last of the Ward White retailers, Halfords.
- Boots restructures itself under a new holding company, Boots Group PLC.
- Boots Healthcare International is sold to Reckitt Benckiser plc; Boots and Alliance UniChem merge to form Alliance Boots plc.
DURING WORLD WAR I
World War I brought new opportunities that Jesse Boot, who was knighted in 1909, was quick to seize. Despite being increasingly disabled by arthritis, he continued to control the company. In the last two decades of the 19th century, the German fine-chemical industry had discovered, developed, and patented a number of pharmaceuticals (aspirin and phenacetin, for example) that it exported to the United Kingdom. The outbreak of war left Boots and the country without a supply of these and other essential fine chemicals, and Boot soon decided to start manufacturing them. He recruited research chemists from Burroughs Wellcome, and production at the new plant started in 1915. In addition to fine chemicals, the company also started to manufacture saccharin during the war. Sales increased at this time, reaching £5 million in 1918.
Jesse Boot, who was awarded a baronetcy in 1916 as a reward for contributions to the Liberal Party, was 70 in 1920. Fearing the effects of the postwar slump on business, which was becoming increasingly burdensome to him to run but which he did not want to hand over to his son John, Boot negotiated privately the sale of his controlling interest to American Louis K. Liggett and his Rexall group of U.S. drugstores. Liggett paid £2.27 million for Boots. Jesse, who remained titular chairman of Boots until 1926 and was made Lord Trent in 1929, gave large amounts of the money to his home city, particularly to University College, Nottingham, which used the money to fund the construction of buildings on the city's outskirts. After the sale of the business, he retired to Jersey where he died in 1931.
Boots was part of the Liggett group from 1920 to 1933, although in 1923 John Boot, vice-chairman of the company, who had disliked his father's transaction with Liggett, persuaded Liggett to sell 25 percent of its shareholding in Britain; thus, for the first time, Boots shares became publicly held, and the company was quoted on the London Stock Exchange. In 1928 the L.K. Liggett Company became part of a much larger U.S. combine, Drug Inc., which, faced with the effects of the American Depression, decided to sell Boots. The money required for the purchase, between £6 million and £7 million, was raised by a group of British investors led by Sir Hugo Cunliffe-Owen and Reginald McKenna.
During the 13 years of U.S. ownership there were some major organizational changes, which lasted beyond that time. Two committees (later merged into one) composed of Boots's senior managers and American representatives, were designated in 1920 to run the company. Nine territorial general managers were appointed to control the 600 shops, and senior managers were sent to the United States to be trained. Stricter control of stock and better accounting systems were introduced, for although sales had continued to rise, profitability had slipped.
As Britain emerged from the worst of the postwar slump, Boots became prosperous again. John Boot, joint managing director, gradually asserted his control over the business, and in 1927 work started on a long-planned new factory at Beeston, just outside Nottingham, which opened in 1933.
From 1933 until 1953 John Boot, now the second Lord Trent and chairman and managing director as his father had been before him, ruled Boots as autocratically as his predecessor. In the years immediately before World War II, expansion was steady; the 1,000th shop opened in Scotland, at Galashiels in 1933, and in 1936 the first shop in New Zealand was opened. The 1930s also saw Boots launch new proprietary product lines, including the No7 cosmetics brand and the Soltan suncare line.
SLOW RECOVERY FOLLOWING
WORLD WAR II
Between 1939 and 1945, like most of the British industry, Boots's manufacturing capacity was directed to the war effort, and the production of pharmaceuticals such as mepacrine, for the treatment of malaria, took priority. Many of the company's shops and some of its manufacturing sites were destroyed or severely damaged by the bombing. Recovery after the war was slow, not least because of the shortage of building materials and skills. The manufacture of new pharmaceutical products increased as Boots started to make antibiotics and, in 1953, cortisone products. The immediate postwar years also saw the start of businesses in Kenya, South Africa, Singapore, Australia, and Pakistan. At home, however, the company had an increasingly old-fashioned image as consumer tastes started to change and shoppers expected a wider range of products.
The second Lord Trent retired in 1954 and died in 1956; his successor as chairman was his former chief assistant, J. P. Savage, who had then been with the company for more than 40 years. When Savage retired in 1961, the offices of chairman and managing director were separated, with W. R. Norman, the second Lord Trent's son-in-law, becoming chairman and F. A. Cock-field, who had joined the company in 1952 from the Board of the Inland Revenue in order to introduce cost accounting methods, being named managing director.
ACQUISITION OF TIMOTHY
WHITES IN 1967
A reorganization of the company took place in 1967 and included establishment of a divisional structure. In 1968 Boots bought the business of Timothy Whites, a longstanding competitor holding more than 600 retail branches, most of them drugstores selling other consumer goods, and more than 100 shops selling housewares merchandise only. The Timothy Whites business had been founded in Portsmouth in 1848 and had followed a pattern of growth similar to that of Boots. In 1935 it had merged with Taylors Drug Company Ltd., a longtime competitor of Boots. The drugstores were integrated immediately with Boots, but the Timothy Whites Houseware branches continued to operate as such until 1983.
In 1971 the purchase of Crookes Laboratories Ltd. and Crookes Anestan Ltd. brought more pharmaceutical business to Boots, and a merger proposed in the following year would have given Boots greater presence in that field. In 1972 the Beecham Company made an unwelcome bid for Glaxo, which instead turned to Boots and a hastily arranged defensive merger. Both arrangements, however, were reported to the Monopolies Commission and in July of that year the commission ruled that neither should take place.
Anxious for expansion in Europe, Boots tried in 1973 to take over the House of Fraser, which already had some department stores in Europe. The bid was referred to the Monopolies Commission again, but even before their adverse recommendation was made, the oil crisis of that year and its effect on stock market prices made it impossible for the two to agree on price.
Instead Boots turned its attention to the United States, where in 1977 it acquired Rucker Pharmacol (renamed Boots Pharmaceuticals Inc.), and in 1986 it added to the company's U.S. operations with the £377 million purchase of the Flint Division of Baxter Travenol. Also across the Atlantic, Boots bought in 1977 and 1978 two chains of drugstores in Canada, and in 1978 it also bought 60 percent of Hercules Agrochemical in the United States. This was merged with Fisons agro-chemical interests in 1980, and the joint venture was sold to Schering in 1983. In Europe Boots acquired 50 percent of the Spanish company Laboratorios Liade S.A. in 1979, and 95 percent of the West German company Kanoldt in 1984. New branches of the Sephora shops in France were opened. In 1982 the parent company was renamed The Boots Company PLC.
The acquisition of consumer eye products manufacturer Optrex in 1983, for £9 million, led to the opening of optical services departments, and sometimes separate shops, augmented by the purchase of opticians' chains, including Clement Clarke in 1986, Curry & Paxton in 1987, and Miller and Santhouse in 1989; these moves led to the formation of the Boots Opticians chain in 1987. Boots bought Farleys Health Products, maker of baby food and adult nutrition products, in 1986 to add to its manufacturing base. In 1987 Boots launched Children's World, a new retail chain selling clothing, toys, and other items for babies and children under 12. The following year, the company divested its loss-making Canadian drugstore chain. Domestic drugstore operations were increased with the acquisition of Underwoods Chemists in 1989. That same year, the £900 million purchase, in a bitterly fought takeover battle, of the Ward White group brought into Boots the Halfords auto parts chain, the Payless do-it-yourself (DIY) home-improvement chain, and A.G. Stanley, operator of the FADS DIY home-decorating chain (Ward White's U.S. operations were also soon sold).
The Ward White acquisition was largely attributed to Chief Executive James Blyth (later Lord Blyth of Rowington), who had taken over the position only in 1987. Blyth also engineered a 1989 restructuring, whereby the company's activities were divided into four operating units: Boots The Chemists, the largest unit, consisting of the BTC chain of drugstores; a retail division, which primarily included Boots Opticians, Children's World, Halfords, A.G. Stanley, and Payless; Boots Pharmaceuticals, developer and marketer of prescription and over-the-counter medicines and health-care products, cosmetics, and toiletries; and a newly created property division, later known as Boots Properties, which managed the company's property portfolio in the United Kingdom, including a large assortment of shopping centers.
Blyth's attempt to diversify Boots into other areas of retailing quickly turned sour. In 1990 the Payless chain was merged into the Do It All chain, a 50-50 joint venture with WH Smith Group PLC. Unfortunately, the U.K. housing market plunged into a five-year depression, which severely cut into DIY sales, thereby turning both Do It All and FADS into loss-makers. Boots was also hurt in the early 1990s by the high debt it had to incur to acquire Ward White. On the plus side, Halfords was consistently profitable in the 1990s.
The company's Boots Pharmaceuticals unit also faced difficulties, largely because its small size made it difficult to compete in the drug industry. In 1991 Boots created two new operating units out of Boots Pharmaceuticals: Boots Healthcare International (BHI), which assumed the over-the-counter drugs business; and Boots Contract Manufacturing (BCM), which became the company's maker of mostly private label health and beauty products. Boots Pharmaceuticals thus became a prescription-drugs-only unit. In 1993 this unit failed in an attempt to create a breakthrough drug to keep itself viable, when development of its Manoplax heart treatment drug had to be abandoned because of side effects. Boots quickly decided to divest the unit, and in early 1995 did so in selling Boots Pharmaceuticals to BASF Aktiengesellschaft for about £850 million, thus ending the company's 80 years in the prescription drugs business.
Meanwhile, Michael Angus, chairman of Whitbread PLC, had been serving as Boots's chairman, with Blyth taking on the additional role of deputy chairman. Also in 1994 Boots sold the Farleys group to H. J. Heinz Company for £94 million; Farleys had been part of BHI but did not fit into the core over-the-counter categories the unit decided to specialize in, notably pain relievers, cough and throat remedies, and skincare products. In 1995 the BCM unit was bolstered through the acquisition of Croda International PLC's private label cosmetics and toiletries manufacturing businesses in France and Germany.
As the 1990s progressed, Boots began to pull back from its diversified retail operations. During the 1993–94 fiscal year, the Sephora retail chain in France was sold. In 1996 Children's World was sold to Storehouse PLC. Later that same year, the company bought WH Smith's 50 percent share of Do It All for £63.5 million, taking complete ownership of the troubled chain. Although Do It All was approaching profitability by late 1997, speculation that Boots would divest itself of this albatross was rife. The company did jettison one of its loss-making Ward White businesses in late 1997 when it sold A.G. Stanley to Alchemy Partners, a private venture-capital group, for a nominal amount. By early 1998, Boots's remaining non-drugstore retail operations—Boots Opticians, Halfords, and Do It All—were each operating as separate units, providing the company with a seven-unit structure (including BTC, BHI, BCM, and Boots Properties). Later in 1998, as expected, Do It All was sold to Focus Retail Group.
Meanwhile, the flagship Boots The Chemists chain continued to keep the company profitable. In its first moves outside the United Kingdom since its failed Canadian venture, BTC announced in late 1996 plans to expand the chain on a pilot basis into Thailand (where six stores opened in 1997) and the Netherlands (where three stores opened in 1997). In the fall of 1996 BTC opened its first unit in Ireland, and had seven stores there by the end of 1997. In January 1998 Boots acquired the Hayes Conyngham & Robinson drugstore chain, the largest such chain in Ireland with 15 stores. In April 1998 BTC expanded in both the United Kingdom and Ireland through the £18 million purchase of Connors Holdings Ltd., a privately owned pharmacy chain with 25 stores in Northern Ireland, five in the Republic of Ireland, three in England, and one in Wales. In 1999 Boots opened its first stores in Japan via a joint venture with Mitsubishi.
Boots Healthcare International was also bolstered in 1997 through the £173.6 million ($275.6 million) acquisition of Hermal Kurt Herrmann, the leading manufacturer of skincare products in Germany, from Merck. The purchase added Germany to BHI's European operations, which included the United Kingdom, France, and Italy.
REFOCUSING ON THE CORE
In 2000 Blyth retired. John McGrath, chief executive of Diageo plc, was named chairman, and Steve Russell took over as chief executive. Russell had been in charge of Boots The Chemists since 1995. Under Russell, Boots scaled back some of its international operations, selling its Netherlands stores to Etos, a unit of Royal Ahold N.V., in 2000 and shutting down the Japanese stores one year later. Shifting strategy, the company moved away from opening up retail outlets in international markets, and instead began emphasizing and promoting the Boots brand on a global basis. A key approach here was to set up branded areas within other retailers' stores. For example, in early 2002 the company began rolling out Boots branded areas inside 100 A.S. Watson stores in Taiwan.
Back home, BTC had been under increasing competitive pressure since the late 1990s, when U.K. supermarket chains began an aggressive push into Boots's core health, beauty, and drug-retail business. Further pressure arose after U.S. retail goliath Wal-Mart Stores, Inc. acquired ASDA Group plc in 1999 and then rapidly increased the number of in-store pharmacies at the U.K. supermarket chain. Under this assault, BTC cut about 2,000 jobs between 1999 and 2002 and closed down some stores in an effort to cut costs by £260 million. Russell also pursued growth through the opening of Boots WellBeing centers, which offered massage and health and beauty treatments. In May 2002 Boots launched a four-year remodeling plan through which 300 BTC outlets were refurbished into six core formats.
In the meantime, BHI in 2000 acquired Clearasil, the world's leading acne-treatment brand, from the Procter & Gamble Company for $340 million. In August 2002 Boots finally unloaded the noncore Halfords chain. Halfords was sold to the venture capital group CVC Partners for £410 million ($671 million).
In January 2003 the company restructured itself under a new holding company called Boots Group PLC. Russell stepped down from his position as chief executive in May of that year, shortly after pulling the plug on the Boots WellBeing centers, which never really caught on. Succeeding him in September was Richard Baker, who had been chief operating officer at ASDA. At the same time, Sir Nigel Rudd was appointed chairman, replacing the retiring McGrath. Rudd, concurrently chairman of Pilkington plc, was a longtime executive chairman at Williams PLC.
Under Baker, Boots was thoroughly restructured. The company's management had grown top-heavy over the years, so Baker in January 2004 launched a plan to cut the head office staff from 3,200 to 2,300, thereby "delayering" management and providing an environment for quicker decision making. To increase the competitiveness of the BTC outlets, the chain cut prices on 3,300 products by as much as 20 percent. A massive remodeling program was also launched centering in part on a huge investment in technology designed to modernize the stores. State-of-the-art cash registers were installed at 1,400 stores, and the chain's entire information technology and distribution systems were rebuilt from the ground up. Peripheral services that had been offered at BTC stores since 1999, including laser eye correction, dentistry, podiatry, and laser hair removal, were done away with. Further improvement came in the form of new store openings, 24 alone in 2005. Baker also worked to refocus the company on its health and beauty business. Boots relaunched its No7 cosmetics brand in 2005, and more beauty halls were added to the shops.
The heavy investment in infrastructure and the price cuts, coupled with a slowdown in U.K. retail sales, took their toll on profits, which fell 27 percent in 2004. In April 2005 Boots announced plans to sell its over-the-counter medicine unit, Boots Healthcare International, to focus further on its core retailing operations. By the fall of 2005, however, a further incentive to divest BHI had arisen; Boots had to do so in order to complete its proposed merger with Alliance UniChem Plc, a deal announced in early October.
BRIEF HISTORY OF ALLIANCE
Alliance UniChem was itself the product of the 1997 coupling of UniChem PLC and Alliance Santé S.A. UniChem Limited had been formed in 1938 by a group of retail pharmacists in London led by Ernest Skues. Their initial focus was the wholesaling of pharmaceutical products to independent pharmacies. After some fits and starts, UniChem began expanding outside London in the early 1960s, establishing satellites in Nuneaton and Leeds. Later in the decade, the company's management team and ownership structure were overhauled, its product range was expanded to include over-the-counter drugs and toiletries, and its geographic area of coverage was extended. UniChem converted to a public limited company with a listing on the London Stock Exchange in 1990. The proceeds funded additional growth, including the expansion into distribution to hospitals.
Acquisitions were also on the agenda in the 1990s. UniChem gained a significant presence in the U.K. retail pharmacy market in 1991 by acquiring the Moss Chemists chain of 92 pharmacies. Over the next half-decade, UniChem expanded the Moss chain to more than 500 pharmacies. The company also grew its wholesaling side, buying Bradford Chemists' Alliance in 1993 and Hall Forster & Company one year later. UniChem also entered the Portuguese market in 1992 through the purchase of three wholesalers in that country. The company later combined its Portuguese operations with those of Alliance Santé, forming a joint venture. Early in 1997 UniChem lost a heated bidding war with Germany's Gehe AG (later Celesio AG) for control of Lloyds Chemists.
Alliance Santé, which was formed in Italy in 1976 as Alleanza Salute, was a troubled enterprise when the founder's son, Stefano Pessina, stepped in and restructured the Naples-based drug wholesaler. Pessina began buying up and overhauling other wholesalers in the fragmented Italian market. Eliminating duplication and centralizing warehouse software and financing, he eventually controlled 15 percent of Italy's drug-distribution industry by the late 1980s, making his company the market leader. Pessina next ventured outside Italy. He acquired a network of drug distributors encompassing France, Greece, Italy, Morocco, Portugal, and Spain, organizing his various operations under a Luxembourg-based holding company, Alliance Santé. The French arm by 1997 controlled 30 percent of the market, ranking as that country's second largest drug wholesaler.
Late in 1997 UniChem acquired Alliance Santé for approximately $614 million in stock. The merged entity was named Alliance UniChem Plc and was based in the United Kingdom with its stock listed in both London and Paris. Alliance UniChem began as the second largest drug wholesaler in Europe, and its Moss Chemists unit ranked as the continent's third largest drugstore chain. UniChem's chief executive continued in the same capacity at Alliance UniChem, while Pessina was named deputy chairman. Revenues for 1998 amounted to £5.35 billion.
Alliance UniChem grew rapidly in the late 1990s and early 2000s through organic growth and acquisitions. The company gained majority control of Spanish wholesaler Safa Galenica S.A. in 1998 and moved into the Czech Republic with the acquisition and consolidation of three regional wholesalers. Alliance UniChem next entered the Netherlands through the 2000 purchase of Interpharm B.V. The company also entered the retail markets of the Netherlands, Switzerland, and Norway. In 2002 Holtung AS, the third largest drug wholesaler in Norway, was acquired. During this same period, Alliance UniChem acquired minority interests in wholesaling businesses in Turkey, Germany, Switzerland, and Egypt. In early 2006, during the period when the merger with Boots was still pending, Alliance UniChem moved into the Russian market by acquiring a 96 percent controlling stake in Apteka Holding ZAO, Russia's fifth largest pharmaceutical wholesaler.
CREATION OF ALLIANCE BOOTS:
In early October 2005 Boots and Alliance UniChem reached an agreement on a £6.5 billion merger. Several days later, Boots agreed to sell Boots Healthcare International to Reckitt Benckiser plc for approximately £1.93 billion ($3.4 billion). The latter deal was completed in January 2006. Shortly thereafter, Boots returned £1.43 billion of the proceeds to shareholders through a special dividend. In late July 2006 Boots and Alliance UniChem merged to form Alliance Boots plc. The company's headquarters were situated at a new office at Sedley Place in London. Nigel Rudd was named chairman, Richard Baker, chief executive, and Stefano Pessina, deputy chairman.
On the retail side, Alliance Boots began with 2,300 drugstores in the United Kingdom and 400 elsewhere, mostly on the Continent. All of the Alliance Pharmacy and Moss stores were to be rebranded under the Boots name over the course of several years. Boots's proprietary lines of branded products, including those under the Boots, Soltan, and No7 names, were to be introduced into Alliance UniChem's stores, while Almus, Alliance's generic drugs brand, would begin to be distributed through Boots outlets. Alliance Boots's wholesaling business initially served more than 125,000 pharmacies, hospitals, and health centers in 14 countries from more than 380 distribution centers. The merger was expected to yield cost savings of £100 million per year, in part from the elimination of 1,000 jobs from a workforce numbering approximately 100,000. Revenues in the first year were expected to top £13 billion ($23 billion). Alliance Boots was likely to seek organic and acquisition-led growth in existing as well as new markets, for both its retailing and wholesaling sides.
Updated, David E. Salamie
The Boots Company PLC; Boots The Chemists Ltd; Boots Opticians Ltd; Boots Beauty International Ltd; Boots Properties Ltd; UniChem Limited; Interpharm B.V. (Netherlands); Alliance UniChem CZ Spo (Czech Republic; 97.1%); Holtung A.S. (Norway); Alliance Santé S.A. (France; 99.8%); Alleanza Salute Italia SpA (Italy); Safa Galenica S.A. (Spain; 99.2%); Alloga S.A. (Luxembourg); E. Moss Limited; Alliance UniChem Norge A.S. (Norway); De Vier Vijzels B.V. (Netherlands).
Lloyds Pharmacy Ltd.; Superdrug Stores Plc; Tesco PLC; ASDA Group plc; Co-operative Group (CWS) Limited; Celesio AG; PHOENIX Pharmahandel Aktiengesellschaft & Co. KG.
"Boots' Flair Adds Up to Retail Excitement," MMR, June 2000, p. 58.
Britton, Noelle, "Boots Treads Carefully," Marketing, May 26, 1988, p. 22.
Buck, Tobias, "Boots Unwinds Non-core Operations," Financial Times, April 18, 2002, p. 44.
Buckley, Neil, "Divide and Thrive at Boots," Financial Times, July 4, 1994, p. 12.
Buckley, Neil, and David Blackwell, "Boots to Expand Health and Beauty Division," Financial Times, June 29, 1995, p. 18.
Chapman, S. D., Jesse Boot of Boots the Chemists: A Study in Business History, London: Hodder and Stoughton, 1974, 221 p.
——, "Strategy and Structure at Boots the Chemists," in Hannah, Leslie, ed., Management Strategy and Business Development, London: Macmillan, 1976, 267 p.
"Chemistry Upset," Economist, February 24, 2001, p. 68.
Green, Daniel, "BASF in £850m Deal to Acquire Boots' Drugs-Making Business," Financial Times, November 15, 1994, pp. 1, 20.
Greenwood, J. E., A Cap for Boots: An Autobiography, London: Hutchinson, 1977, 254 p.
Hollinger, Peggy, "Boots Back on International Stage," Financial Times, October 11, 1996, p. 24.
——, "Slow Waking from a Nightmare," Financial Times, August 29, 1997, p. 16.
——, "Trying to Lay a £900m Spectre," Financial Times, November 6, 1997, p. 29.
Hollinger, Peggy, and Graham Bowley, "Boots Expands into Germany," Financial Times, September 11, 1997, p. 31.
Humes, Christopher Brown, "DIY, Disillusionment and Divorce," Financial Times, August 22, 1996, p. 21.
Jackson, Tony, "Registering the Value of Cash," Financial Times, January 19, 1998, p. 14.
Monopolies and Mergers Commission, The Boots Company Limited and the House of Fraser Limited: A Report on the Proposed Merger, London: HMSO, 1974, 44 p.
Morais, Richard C., "Pep Pills," Forbes Global, March 1, 2004, p. 16.
Pinto, David, "Boots at Turning Point in Transformation," Chain Drug Review, December 16, 2002, pp. 1, 20.
——, "Russell Exits Boots; Era Ends," MMR, January 27, 2003, p. 11.
"The Reinvention of Boots," Chain Drug Review, September 24, 2001, p. 21.
Rigby, Elizabeth, "Alliance Boots Predicts Savings of £100m," Financial Times, August 1, 2006, p. 16.
——, "Boots and Alliance UniChem Combine to Create a Powerful Retailing Concoction," Financial Times, October 1, 2005, p. 17.
——, "The Man in Charge of Boots Goes in Search of a Remedy for the Company's Headaches," Financial Times, June 30, 2005, p. 23.
Saigol, Lina, "Boots to Cut More Than 1,000 Jobs," Financial Times, February 5, 2001, p. 25.
Singer, Jason, "U.K.'s Boots to Refocus on Drugs with Alliance UniChem Merger," Wall Street Journal, October 3, 2005, p. A3.
"Unichem Merges with Alliance Santé Group," Chemist and Druggist, November 29, 1997, p. 34.
Vander Weyer, Martin, "Good Value at Boots," Management Today, September 1995, pp. 42 +.
Vitorovich, Lilly, "U.K. Beauty Retailer Boots Takes Steps to Buff Up Its Supply Chain," Wall Street Journal, March 15, 2006.
Voyle, Susanna, "Encouraging an Ageing Colossus," Financial Times, September 13, 2003, p. 3.
Walden, Geoff, "After Deals, New Boots Emerges," MMR, October 17, 2005, pp. 19–20.
Weir, Christopher, Jesse Boot of Nottingham: Founder of the Boots Company, Nottingham: The Boots Company PLC, 1994, 71 p.
Wheatcroft, Patience, "No Fast Cure for Boots," Management Today, April 2005, p. 27.