A couple of top Alliance Boots executives were here today, and amid happy talk about the company’s good fortunes was this newsy tidbit: during the depths of the global economic downturn, women bought more mascara than ever. Why mascara? Ornella Barra, chief executive of the company’s pharmaceutical wholesale division, said it was “psychological.” Women wanted to feel positive about themselves, even as they or their husbands were losing jobs. Mascara was a quick, easy and inexpensive way to perk themselves up. Generally speaking, Boots drug stores – a U.K. retailing mainstay- benefited as people “traded down” to the firm’s “Boots” brand of mid-price health and beauty products, said Stefano Pessina, Alliance Boots’ executive chairman and co-owner with Kohlberg Kravis Roberts, the private equity firm. “Boots” products are now available in the U.S. in Target stores, and so far, Pessina says, his company is “reasonably happy” with this arrangement. He sees the Target relationship evolving so Alliance Boots has “better involvement, better control of what happens in the store.” Separately, the company is seeking opportunities to expand its health-and-beauty wholesale distribution business and thinks the sector is ripe for partnerships, mergers and acquisitions. It’ll be “a few years” – and some significant debt repayments – before Alliance Boots goes public, Pessina said. Chatting with Pessina, it becomes clear he “gets” what drives U.K. customers’ loyalty to Boots: clean, inviting stores (in contrast to the grungy, poorly lit venues Americans are used to); store brands – “Boots” and a new “Boots Laboratories” line – which have a proprietary, rather than cheap, vibe; and the need for a motivated, specialized sales force (as opposed to apathetic clerks who can make the shopping experience a drag.) Pessina is a realist about the company’s ability to expand its retail footprint: Stand-alone Boots shops (complete with pharmacies) won’t dot the global retailing landscape any time soon, he says. He seems to be placing his bets on 1) selling more Boots brand products via retail partners around the world; and 2) expanding the wholesale business. ”It’s possible to find the right mergers” in the latter industry, he told us.
KKR
Consumer Products, Corporate Restructuring, Earnings, Economy, Private Equity / 1 Comment
Once upon a time when people talked about Kohlberg Kravis Roberts, you thought of takeovers – some hostile and some friendly. The business has certainly changed and even more so by the credit crisis over the past year. Today, KKR essentially played the role of lender, if not of last resort, pretty close to it.
KKR agreed to loan Kodak up to $400 milli0n and along with the between 10% and 10.5% annual interest KKR receives for 8 years, it gets warrants to purchase up to nearly 20% of Kodak. This deal shows how difficult times have become for Kodak. Not only is it paying a higher interest rate on the loan, but it looks like it is a pay-in-kind loan – meaning Kodak doesn’t pay KKR cash interest but instead, new securities. So, the principal it owes when these bonds come due will balloon. Payment on these bonds become tomorrow’s headache, not today’s.
Credit Crisis, Credit Markets, Economy, Initial Public Offerings, Investing, Investment Banking, Restructuring, Wall Street / 1 Comment
It seems like such a long time ago when Wall Street firms did the classic trade – you take a company private, pay yourself big bucks for doing it, grab huge recurring fees, take the company public and pull more money out along the way. After the credit crisis of last fall, it felt like those days would never return or if they did, it would be a long, long time from now.
Well, it’s back. Now.
Credit Crisis, Economy, Investing, Mergers & Acquisitions, Retailing / Comments Off
Imagine this: You are a retailer, and a highly leveraged one at that. Your inventories are building. You customers are being hammered by a recession. And the credit crisis doesn’t help on the borrowing front. That toxic recipe has killed Linens N’ Things and Circuit City, to name a few. But not those handful of different companies that have the word “Dollar” in their names.
