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. Last Updated: 07/27/2016

KKR Makes $18.8Bln Bid for Alliance Boots

Kohlberg Kravis Roberts & Co. and Italian billionaire Stefano Pessina offered ?9.7 billion ($18.8 billion) for Alliance Boots, the largest British drugstore chain, in what would be Europe's biggest buyout.

New York-based KKR and Pessina, the British company's deputy chairman and largest shareholder, bid 1,000 pence ($19.31) per share, they said in a statement. The offer, which Nottingham, England-based Alliance called "preliminary and highly conditional.''

KKR is proposing its largest transaction since a $45 billion bid with Texas Pacific Group for TXU Corp. last month. Alliance Boots was formed last year in a merger of 2,600 British stores and a wholesale drug supplier with more than 125,000 pharmacies and hospitals.

"It's clearly attractive given the cash flow generated by the company, the potential for restructuring beyond what the management have signaled and the opportunities for expansion,'' said Chris Gower, an analyst at Man Securities in London. "It's a perfect opportunity for a private equity firm.''

Buyout firms announced a record of more than $700 billion in takeovers last year. Investors seeking higher returns than stocks and bonds provide poured $432 billion into private-equity funds last year, according to London-based Private Equity Intelligence.

A buyer may attempt to exceed CEO Richard Baker's annual savings target of ?100 million ($193 billion) by the fourth year of the union. The company's Boots drugstores have added beauty products and services, as supermarkets grabbed a higher share of health care spending in Britain. Alliance also has more than 350 outlets elsewhere in Europe and Asia.

The offer values Alliance at more than J Sainsbury, Britain's third-largest grocery company. Sainsbury was potentially the biggest European leveraged buyout after a group, including KKR, said last month that they might bid for the supermarket chain.

KKR's proposal requires access to Alliance Boots' books and completion of a study, which it said would take about three weeks. The British company's board would also need to recommend the bid to shareholders, the firms said.

KKR and Pessina said they intended to "work closely with the existing executive management team.''

Simon Moyse, a spokesman for KKR in London, declined to comment beyond the statement, which said the approach was "friendly.''