Alliance Boots set to name Hornby as new chief executive
Shock return for discredited former HBOS banker at pharmacy chain
Monday 08 June 2009
Andy Hornby, the former chief executive of the failed bank HBOS who is accused in some quarters of being one of the key architects of the UK banking crisis, is set to make a shock return to front line business as the chief executive of Alliance Boots.
The pharmacy chain, which is owned by US private equity group Kohlberg Kravis Roberts (KKR) and its executive chairman Stefano Pessina, confirmed yesterday that Mr Hornby is one of the names being considered for the role: "Alliance Boots has been looking to fill the new role of chief executive. The new chief executive will report to Stefano Pessina, who will continue to work full-time in the business, including chairing the group's executive committee. Alliance Boots confirms it is currently engaged in discussions with Andy Hornby, who is a leading candidate for the role. It hopes to complete the process shortly and a further announcement will be made at that time," the group said in a statement.
In fact, it is understood that Mr Hornby will almost certainly get the job, with an announcement expected as early as this week. Mr Hornby's appointment by the heavily indebted group would mark a remarkable comeback. As recently as February he was forced to apologise in front the Treasury Select Committee for his role in last year's banking meltdown and is now widely blamed for many of the difficulties faced by the Lloyds Banking Group.
Lloyds merged with HBOS in a hastily arranged and government brokered takeover in January, which was designed to prevent HBOS going bankrupt. The combined group has spent the last few months trying to establish the scale of HBOS's exposure to toxic mortgage assets and other non-performing investments. The bank has been forced to accept a taxpayer-funded bailout after declaring billions of pounds of losses.
Such a speedy return for Mr Hornby is likely to meet with accusations that he is being rewarded for the failure of HBOS. According to the group's latest annual review, five out of six of Boots' directors earned more than £700,000 in salary and bonuses last year.
The appointment was also met with incredulity by politicians yesterday. Lord Oakeshott, the Liberal Democrats' Treasury spokesman in the House of Lords said: "The private equity asset strippers KKR have taken over Boots and loaded it up to the eyeballs with debt. The company should have learned the lessons of HBOS's collapse under Mr Hornby and pay down its debts so that Boots might become a strong company again."
KKR and Mr Pessina took Alliance Boots private in 2007 in one of the most high profile and ambitious leveraged buyouts in the months leading to the onset of the credit crisis.
KKR borrowed nearly all of the estimated £12.4bn for the takeover and like in other private equity-backed deals passed on the debt to Alliance Boots. The company is now forced to hit performance and debt targets stipulated by the syndicate of banks that financed the deal. The group has met all its targets to date and has been boosted by strong sales and by savings made from aggressive job cuts.
But it emerged yesterday that Alliance Boots has sent "begging letters" to its landlords, asking to move from quarterly to monthly rent payments in an effort to help cashflow. One commercial property specialist said he had received such a letter within the last week. Boots was not available for comment yesterday.
In May, KKR announced a $1.2bn (£730m) loss last year as the financial market slump took its toll. KKR said it swung to a full-year loss from "economic net income" of $815m in 2007.
Mr Hornby made his name as a retailer having worked for Asda, where he was managing director of its clothing brand, George. He continues to serve as a non-executive director of Home Retail, the Argos owner.
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