Financial Times
By Andrea Felsted, Senior Retail Correspondent
Stefano Pessina, executive chairman of Alliance Boots, has struck plenty of deals over his 40-year career.
But they were eclipsed this week by the agreement he and private equity group Kohlberg Kravis Roberts struck eventually to sell Alliance Boots for about £10bn.
“I have done many deals in my life, and some transformational deals, at least transformational at the time. I have to say that all the deals I have done are really very small if compared to this deal,” he said.
At 71 – an age when many executives might think about slowing down – Mr Pessina has been scouring the globe for his latest deal.
He told the FT in April that he was looking for another game-changing transaction, and was particularly eyeing the US.
Mr Pessina said this week that the tie-up withWalgreens, in which the US pharmacy chain will initially take a 45 per cent stake in Alliance Boots for more than $6bn, was a dream come true.
The Italian entrepreneur, with his white hair, smart suits and jovial manner, trained as a nuclear physicist in Milan.
Born to a well-to-do Milanese family, he started out by taking on part of his family’s eclectic business interests. While other family members supplied textiles to Milan’s fashion houses, Mr Pessina set about constructing a wholesale pharmaceutical distribution chain, initially in Italy, but spanning Europe by the turn of the millennium
It was through this business – and his hunt for deals – that he met his long-time partner, Italian businesswoman Ornella Barra, who now runs the Alliance Boots wholesale pharmaceutical business. Mr Pessina originally combined his pharmaceutical wholesale business in the south of Italy with Ms Barra’s in the north.
Together they acquired a series of companies in France, Spain, Portugal, Greece and Morocco, to create Alliance Santé.
More transformational deals followed. In 1997, Alliance Santé merged with UniChem to create Alliance UniChem. Nine years later, Alliance UniChem sealed a deal with Boots, one of Britain’s best-known high street chains. In 2007, Mr Pessina and KKR took Alliance Boots private in a £12.4bn deal. The acquisition, at the height of the financial boom, was at the time Europe’s biggest buyout.
His dealmaking skills – and his successful stewardship of Alliance Boots over the past five years while battling £9bn of debt and sluggish markets – have made Mr Pessina rich.
He made £500m from the buyout, but will not take any cash from the first phase of the latest deal. Instead, he will have an about 8 per cent holding in Walgreens, worth about £1.4bn. He could make another £2bn from the second phase, which he is also likely to take in shares. He initially invested £1.2bn in the deal.
“I’m not looking for money,” he insisted this week.
But some of Mr Pessina’s actions have raised eyebrows. He closed the Boots final salary pension schemes, which he has regarded as unfair, to existing members. The Monaco-based entrepreneur also moved Alliance Boots’s domicile to the low-tax region of Zug in Switzerland, courting scrutiny of the company’s tax affairs.
But according to Samuel Johar, chairman of headhunter Buchanan Harvey: “Too many retail leaders are doers rather than thinkers. Stefano is a thinker. And he is also prepared to be bold. He has done a really fantastic job at Boots, when the previous management floundered. Despite the fact that he paid a huge premium, he has managed to elicit far more value than anyone imagined.”
.
