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Boots offloads pension scheme for £4.8bn amid fresh sales rumours

Boots parent company Walgreens Boots Alliance (WBA) has offloaded Boots employees’ pension scheme in “the largest single transaction of its kind”, it has announced. 

Boots’ parent company last week (November 24) announced that it had secured a £4.8 billion deal to hand over responsibility for all Boots pensions to financial service provider Legal and General (L&G) over the next two years.

It said that the “buy-in” deal “insures all 53,000 members in the Boots pension scheme, making it the largest single transaction of its kind”.

WBA added that it would “bring forward approximately £170 million of already committed payments” and “has committed” to paying “extra contributions” estimated to be “approximately £500m” to the scheme.

It saidthat WBA’s previous “guarantee” to the scheme has been “terminated and replaced with a smaller temporary guarantee” that will decrease until L&G becomes “responsible for paying members’ benefits directly” in “due course”.

This will ultimately enable the scheme to “be wound-up”, with the process “expected to take up to two years”, according to WBA. 

The American parent company said that the deal was decided “after exploring a range of strategic options” and that offloading the pensions to L&G “was selected as the best way to safeguard members' benefits” against market risks.


Sales rumours


The news comes as rumours circulate that WBA is planning to put the UK multiple up for sale again.

Earlier this month (November 19), The Times reported that “City sources” believed WBA could “restart the Boots sale process…within the next six months”.

It claimed that WBA was “determined to sell Boots” and that the pension scheme had previously been “a deterrent to the private equity firms” that were prospective buyers last year.

C+D put the claims to WBA, which declined to comment.


“Greater certainty”


Sebastian James, senior vice president and managing director of Boots, said that the multiple is “very pleased to have achieved the gold standard outcome for [its] pension scheme” and “fully secured the benefits of all members with a highly respected insurer”.

He said that the deal “will provide greater certainty to both the scheme members and to Boots” and stressed it was “an excellent outcome for both parties”.

Chair of trustees for the Boots pension scheme and director of Law Debenture Pension Trust Corporation Alan Baker said that the firm welcomes “the additional payment from Boots, in addition to the sum it has already committed”.

“As a result, the scheme will not be reliant on Boots to pay benefits to members and pensions will be protected for decades to come”, he added.

CEO of L&G Retirement Institutional Andrew Kail said that the financial service provider is “very pleased to have agreed this buy-in”, which represents its “largest ever single transaction”.

Mr Kail said that the deal was a “testament” to L&G’s “long-standing relationship” with WBA.


Boots sale latest


The new sales rumours come after WBA announced last year that it had ultimately decided not to sell the UK pharmacy chain.

At the time, it cited “market instability” as the reason why no prospective buyers were able to make an offer “that adequately reflects the high potential value” of Boots.

Earlier this year, Boots also announced that it would close 300 branches located “in close proximity to each other” over the next 12 months.

And this summer, a report by pharmacy sales specialists Hutchings claimed that WBA was “in the throes of undertaking a strategic review of Boots pharmacies, possibly with an eye to a future sale”.

Hutchings claimed that “private equity investors are rumoured to be potential suitors”.

At the time, a Boots spokesperson told C+D that “nothing [had] changed” since June 2022, when WBA announced its decision to keep Boots under its ownership.

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