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.
Kohlberg Kravis Roberts
Corporate Finance, Corporate Restructuring, Credit Markets / Comments Off
After the market closed on Sept. 16 (this past Wednesday), Eastman Kodak Co. announced a plan to refinance $575 million of its 3 3/8% convertible notes through two separate private placements. Good news for the holders of these bonds because they would get paid par, or the full $1,000 for each bond they held. But somebody may have known something about this deal before others.
The plan to retire these bonds would be especially good news for holders because these bonds were what are called broken convertibles. Convertible bonds do just what the name sounds like – they convert into a company’s common stock at some point in the future if the holder elects to do so. They become broken when the conversion price is significantly higher than the common stock price, making it very unlikely to convert. So, the bonds then trade more like a bond rather than the equity.