Henry Kravis and Guy Hands went head-to-head in the battle for Boots yesterday as their rival bids ignited the stock market and increased the likelihood of the first FTSE 100 company falling to private equity.
Guy Hands, British founder of Terra Firma, sought to spoil a recommended offer of £10.90 (€16.06) a share from Mr Kravis, his American counterpart at Kohlberg Kravis Roberts, with a £11.15 (€16.43) a share indicative offer that values the company at £10.9 billion.
Shares in Alliance Boots, the European pharmacy group, surged as high as £11.41 as the prospect of a bidding war increased.
By going public with a £11.15 approach, the Terra Firma-led consortium - which also includes the Wellcome Trust, Britain's biggest charity, and HBOS - helped raise the market price and prevented KKR and Stefano Pessina from locking up the deal with a "dawn raid" - buying big slices of shares in the market.
Mr Pessina, executive deputy chairman of Alliance Boots, is its leading shareholder with a 15 per cent stake and would only require an additional 10 per cent to have an effective blocking minority. Merrill Lynch, adviser to KKR, is believed to have managed to buy about 2 per cent in the market yesterday.
Sir Nigel Rudd, chairman of Alliance Boots, is to allow the Terra Firma consortium more access to management and the books to give it every chance to come to a firm offer.
The board yesterday recommended a £10.90 a share firm offer from KKR and Mr Pessina after talks lasting most of Thursday night. It stuck to its recommendation even in the face of Terra Firma's higher offer, but said it would offer the rival bidder "high-level due diligence including access to senior management".
Richard Baker, chief executive of Alliance Boots, is expected to meet Terra Firma in the next few days.
However, it appears Mr Hands will not be able to secure the services of Mr Pessina, seen as the strategic architect of the group, after he again committed to KKR and said he would walk away from the company rather than work with anyone else. He has not decided what to do with his shares.
Whichever suitor is successful, the probability of a successful bid fuelled the trade union anger with the private equity industry.
Brendan Barber, head of the UK labour union movement, in a joint letter to Sir Nigel and Mr Pessina, said: "The prospect of a takeover of Boots in the UK's biggest-ever private equity deal will alarm both staff and customers."
