Sir Nigel Rudd: The takeover king turned believer in mergers of equals

The Interview: Chairman of Boots
Click to follow
The Independent Online

"I'd promised to take him. He's seven and he'd have been upset if Grandpa hadn't taken him. So I did, and then I came back to London," the 58-year-old multimillionaire industrialist says.

The reason he came back, of course, was to thrash out the details of the biggest deal in the retail sector since Wm Morrison bought Safeway 19 months ago: the £7bn merger between Boots and Alliance UniChem. Despite the back-to-back meetings and a few quasi all-nighters, Sir Nigel is clearly thriving on being back in the cut and thrust of the Square Mile.

"It's been very exciting. It takes me back 20 years to when I was with Williams," he says, animatedly. Memories of the decade of takeovers that spawned the Chubb-to-Kidde engineering conglomerate he built up with his partner, Brian McGowan, in the 1980s have come flooding back but with one crucial difference. "We did takeovers back then because we thought the old management was useless. This is so different because this is a merger where I actually think Alliance UniChem can do so much for Boots and Boots can do so much for Alliance UniChem. When I was 35, I thought I was the only person who could do good for anybody."

Whether the City thinks Sir Nigel, who has chaired Boots for the past two years but been on its board for five, is doing good this time by seeking the tie-up is a moot point. Shares in both groups have plummeted since the merger was announced amid widespread scepticism from analysts and investors that Boots is doing the right thing. Only the generous £1.9bn price tag for Boots Healthcare International yesterday halted the fall in Boots' stock.

Critics argue that Boots is getting a low-growth, debt-ridden business stuffed with goodwill from the multiple acquisitions that Stefano Pessina has made since he merged his Alliance Santé business with UniChem in 1998. The flip side, some say, is that Alliance UniChem is taking on a group battered by falling margins and sales, which successive management teams have struggled to reinvent. Moreover, without this deal, sceptics add, Boots, which all but issued a profits warning nine days ago, would be trapped in a strategic dead end, with no escape route from the supermarkets. Sir Nigel admits that even his mother-in-law berates him for the gaps on Boots' shelves. (Pond's cold cream, apparently.)

Sir Nigel, who spawned the deal from his long-standing acquaintance with Paolo Scaroni, Alliance UniChem's chairman, reels off his rebuttals. "I don't need to be chairman of a bigger business. I'm not interested in these kind of grandiose things. People say I'm trying to save my reputation; somebody said I'm doing it because I want to induce an LBO [leveraged buyout] bid.

"Well, I know just about every LBO operator in London and they know me and if I wanted someone to buy Boots, I wouldn't have had to go through all this for six months." He pauses, for one of his frequent chuckles at what he regards as a good joke. "The idea that I'd go through all this just to put Boots in play is frankly ridiculous." Oh, and he sorted the cold cream issue.

Perhaps unusually for a big deal during an M&A boom, Sir Nigel stresses that this is "not an investment bank-generated deal". He sees the "hostile reaction" as the natural result of Boots surprising the market by making a move for a relatively unknown company in a different sector.

"Alliance UniChem has crept up on people," he says of the £3bn, FTSE 100, pan-European, drugs wholesaler and pharmacist. But not on Sir Nigel. He was introduced to Mr Pessina, a former nuclear physicist who has been buying drug wholesalers since the 1970s, four years ago by Mr Scaroni, then chief executive at the glass company Pilkington, where Sir Nigel is chairman. One of the first things Sir Nigel did on appointing Richard Baker to run Boots was to get him to sit down with Mr Pessina.

"This is very much a deal that's been built up with mutual trust between two companies looking at the industrial logic and then going to the investment bankers and saying, 'How can we put this together mechanically etc?' We're both pharmacists. There's a huge amount of complementary business. We're their largest customer, they're our largest supplier."

Sir Nigel has sat down with at least 12 major investors by the time we meet yet he manages to duck each question intended to ferret out their reaction. I'm left to surmise that impressions have been mixed at best, seeing as he grasps every opportunity to hammer home how shareholders want different things from a business.

Unsurprisingly, questions have focused on the management structure that hands responsibility for strategy and M&A activity to Mr Pessina, who as executive deputy chairman will not report to Mr Baker, the chief executive, but to the board. "I don't have any problem with that at all. I think if you have a weak chairman - and it's for others to judge whether I'm a weak chairman or not, I don't think I am - you might have issues. But I will make sure there is rigid discipline."

Sitting in his office at Barclays (his string of non-executive posts includes deputy chairmanship of the bank), dressed in a pinstriped navy suit, his gold watch and silver monogrammed cufflinks peeking out from the sleeves of his baby pink shirt, Sir Nigel is the very picture of the modern capitalist. Which is enough to give anyone hope when you consider his fairly humble origins. The Derby grammar school boy is the son of a civil servant who eschewed a potential crack at Oxbridge to train as an accountant on his father's retirement.

Were he starting out again, Sir Nigel says he'd think twice about whether to work for a public company given the constraints placed on executives by both short-termist commentators and the corporate governance lobby. On the issue of Rentokil (which is under siege from Sir Gerry Robinson who is attempting a reverse takeover), Sir Nigel is easily wound up. After all, it is chaired by Mr McGowan. "Gerry Robinson is very, very charming but the idea that he can run that business better than Doug Flynn [the chief executive] or Brian McGowan is a joke. Paying £60m or £70m just to change the chairman seems to be absolutely barking. If any investor falls for it, I don't think I'd want my money invested with them."

Time will tell if shareholders will feel the same way about Alliance Boots.

Football and Boots

Age: 58

Pay: Boots (chairman) £318,000; Pilkington (chairman) shares worth £3.1m in lieu of pay; Pendragon (chairman) £84,000; Barclays (deputy chairman) £98,000

Education: Bemrose Grammar School, Derby

Career: Chairman, C Price & Son 1977-82; chairman, Williams plc 1982-2000; chairman, East Midlands Electricity 1994-97; chairman, Kidde 2000-03. Knighted in 1996

Interests: Football, golf, shooting, theatre, family.