Alliance Boots yesterday became the first FTSE 100 company to fall to private equity after KKR, the US buyout group, and Stefano Pessina, Boot's executive deputy chairman, launched an £11.1 billion (€16.3 billion) bid for the health and beauty group.
A rival consortium of Terra Firma, the Wellcome Trust and HBOS conceded defeat yesterday.
The KKR-Pessina offer marks the largest buyout in Europe to date. It values Alliance Boots at a 4.5 per cent premium to the £10.90 a share KKR offer, recommended last week by Sir Nigel Rudd, Boots' chairman, and his board. It is 40 per cent above the price at which Boots shares were trading before the approach.
Earlier yesterday, KKR had raised its stake to 10.5 per cent after buying an additional 40 million Alliance Boots shares at £11.39 in a "dawn raid" on the market. Combined with Mr Pessina's holding, that took the bidders' stake up to 25.6 per cent.
KKR's acquisitions follow a similar move by the group late on Monday, when it snapped up 6 per cent - or 49.7 million - of Alliance Boots shares, also at £11.39.
The two moves trumped Terra Firma's indication that it was prepared to pay £11.15, or £11.26 including a £105.9 million break fee, for the company.
"Boots is a critically important national institution, and we are naturally disappointed not to be able to execute the bold vision we had for the company," Terra Firma said in a statement.
Alliance Boots said it was recommending the revised £11.39 a share offer. The price represents a victory for Sir Nigel, who was keen to seal a good deal for his shareholders.
His efforts to generate an auction for the group, which has 3,100 stores, were stifled by his deputy, who was also Alliance Boots' largest shareholder.
Shares in Alliance Boots were trading 5½p lower at £11.21 in afternoon London trading.
The KKR victory comes less than a month after a consortium led by CVC, another private-equity group, ended its attempt to buy J Sainsbury, the UK's third largest retailer.
For Guy Hands of Terra Firma this will prove a setback. Mr Hands had hoped to build a powerful force in healthcare with his partners Wellcome Trust, the biggest charity in Britain, and HBOS.
Reports suggested Mr Hands was also considering a bid for Bupa's hospitals in the UK in a deal that would have expanded his interests across drug retailing, distribution and private hospital provision.
