Alliance/Boots tie-up: will it work?

Alliance Boots would be Europe’s leading retail pharmacy business, with a network across 11 countries and turnover of £14bn.

Boots CEO Richard Baker "has a habit of springing surprises on the City", said Matthew Goodman in The Sunday Times. This week, instead of a disappointing trading statement, he announced a £7bn merger with rival chemist Alliance Unichem. The resulting entity, Alliance Boots, would be Europe's leading retail pharmacy business, with a network across 11 countries and turnover of £14bn.

It certainly works for Alliance Unichem, said Martin Dickson in the FT. It gains access to Boots's strong brand name and bolsters both its retail and wholesale businesses. And Boots gains growth potential outside its home market, courtesy of Alliance Unichem's European operations. Boots should also benefit from the enlarged group's greater buying power, helping it to combat supermarkets, said Camilla Palladino on Breakingviews.com. Moreover, Alliance's community-based pharmacies and European operations will reduce Boots's exposure to the high street.

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