Investors put the Boots in
Sunday 10 April 2005
Richard Baker has been put on notice by shareholders after the Boots chief executive issued his second profits warning this year.
As well as the disappointing trading update, the chain announced last week it would sell off drugs business Boots Healthcare International (BHI), owner of Nurofen, Clearasil and Strepsils. The cash will then be returned to shareholders.
But some investors believe the U-turn - Mr Baker said in January that BHI was a core business - is just a sop to make up for the poor trading.
They are also becoming ever more frustrated with Mr Baker's performance.
"He's in last chance saloon territory," said one. "He's done a lot of simple stuff - he's cut a lot of jobs, for instance - and has done a lot of sale and leasebacks on the property. But now he's reached for the ultimate plan B and is selling off arguably the best part of the business."
Valuations of up to £1.25bn have been put on BHI, with giants such as Reckitt Benckiser and GlaxoSmithKline touted at possible buyers.
Mr Baker had a tough time ahead of him, the investor added. This view was echoed by a former Boots manager, who said that Mr Baker had six months to start showing an improvement at the retailer before losing the backing of the board. "The most important thing is the role of [chairman] Sir Nigel Rudd," he said. "He will have no qualms about pointing the revolver at Richard Baker: he's not going to give him the benefit of the doubt beyond a certain point. He would rather be remembered as the guy who fired Richard Baker than the guy who let things drift."
Last week's gloomy update from the chain prompted the credit agency Standard & Poor's to downgrade its credit rating, while equity analysts swiftly cut forecasts.
It also drew out interest from potential private equity buyers. A spokesman for Blackstone conceded the group was "probably" looking at Boots, while others thought to be interested included fellow US outfit Texas Pacific and UK players CVC Capital, Cinven and Permira. Buyout firm Kolhberg Kravis Roberts is also thought to be a contender. Boots, however, has a market value of nearly £5bn, meaning a consortium bid would be more viable.
All this puts even more pressure on Mr Baker, who took over the top job in 2003 after former incumbent Steve Russell quit.
- 2 Italian police 'reveal' what Jesus looked like as a young boy
- 3 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
Italian police 'reveal' what Jesus looked like as a young boy
Who should I vote for? The Independent quiz matches best political party for undecided voters ahead of the general election
Met Gala 2015: Beyoncé manages to out-skimp Rihanna, Miley and Kim Kardashian combined with near-naked ensemble
Syria's 'circle of hell': Aleppo residents describe children without heads, streets filled with blood and injuries never before witnessed by surgeons
General Election 2015: Photographic history of Bullingdon Club tracked down - including new picture of David Cameron in his finery
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...