Anthony Hilton: How Boots swayed sceptical journos

When Boots announced last October that it was merging with Alliance UniChem, its smaller, more dynamic rival, media response was scathing.

The deal was believed to be a disguised takeover, with the Alliance team likely to come out on top. It was said that the two groups were, in fact, vastly different businesses, because although Alliance had a chain of small chemist shops, the bulk of its revenue came from its wholesale operations in mainland Europe, where it was a major supplier to the Continent's numerous independent pharmacies.

Rumour was that Boots's current management did not know how to revive the ailing chain's fortunes, so was chucking in the towel under the guise of pursuing a strategic merger.

This Monday (31 July), the shares of the combined group began trading for the first time, putting the seal on a deal that had gone through without a hitch, which could be seen to underline how irrelevant the media's opposition is. More charitably, the smooth passage of the merger should be seen as a triumph for the executives concerned in the way they have changed the media perception of it in the intervening months.

It was achieved the old fashioned way, but with a clever twist and great discipline.

First, Boots chairman Sir Nigel Rudd spelled out his side of the story time and time again, until his message stuck, at the same time making sure there were no conflicting voices. His chief executive, Richard Baker, barely gave interviews, but confined himself to making supportive noises from the sidelines. The Alliance UniChem side also made sure they did not rock the boat.

Second, Sir Nigel did not so much confront the criticisms as agree with many of them - but he drew their sting by painting Boots as a business facing such strategic challenges that there was really very little alternative.

The message was that Boots was living on borrowed time, because its high margins were unsustainable in the face of competition from the supermarkets. The clever part was getting this across without either causing a panicky collapse in the Boots share price or causing Alliance UnicChem to get cold feet.

Not an easy trick to pull off, but Sir Nigel seems to have managed it.
anthony.hilton@haynet.com

Anthony Hilton is city commentator on London's Evening Standard

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