Buy spree of billions as Boots thinks big

Alliance Boots, the chemist under the control of private-equity billionaire Stefano Pessina, is ready to spend billions of pounds on acquisitions to turn it into a European healthcare giant.

Unveiling profits in its first year as a private company of just over £1 billion - a rise of 18% for the listed company that was sold last year - Pessina today said he is poised to strike.

Boots generated huge amounts of cash last year and private-equity partner Kohlberg Kravis Roberts will provide more funding for the right deals. Pessina, the executive chairman, said: "There is an incredible pipeline of acquisitions. They will be mainly overseas, but there is interest in the UK too. We are not in a hurry, but we will not neglect a good opportunity."

He intends to buy up pharmacies and rebrand them under the Boots name as he seeks to expand rapidly. Hewants the company to be seen as a serious player in the healthcare industry rather than just a retailer.

In a results statement more detailed than private firms are obliged to produce, Boots said sales for the year to the end of March were up almost 5% at £15.3 billion while trading profit was £771 million. Pessina claims to have improved Boots' market share by 10%, gaining on rivals across the board.

Boots was bought last year for £12.4 billion in the largest-ever private-equity deal in Britain. Pessina holds a 15% stake, and insists he has no interest in selling.

He described a re-flotation of the company as "very likely" but insisted it would not be for several years.

"We are not here for the short term. We are not here to reduce people or extract cash from the business," he said.

Pessina is adamant he will not take a dividend payment despite the cash the company is generating. About £460 million has been reinvested in the business so far, mostly on improving the shops.

Banks have been left holding billions of debts used to fund the takeover deal, which have since been impossible to sell on because of the credit crunch.

Pessina said he was "very sorry for the banks" but says the point of having them underwrite the debt was for insurance if anything went wrong. Some of the underwriters have decided to hang on to the debt rather than sell it at a reduced price.

The company has switched its headquarters from the UK to Switzerland, although Pessina claims this is a signal to the market that it is a big European player, rather than a tax dodge. He agrees the economy is struggling, but believes Boots will outperform.

"Market conditions are very difficult in many countries. Governments are always trying to squeeze margins," he said.

The annual review accompanying the company results also unveils the 12-strong board of directors for the first time. It includes Pessina's partner Ornella Barra, KKR partners Dominic Murphy, Mattia Caprioli and Sergio D'Angelo and Chris Britton, who formerly worked for Diageo among others.

Chief executive Richard Baker left once the takeover was concluded.