The departure of Alliance Boots’ chief executive Andy Hornby in March to “take a few months’ break” took observers by surprise, precisely because everything seemed to have been going so well. Group sales and profits have increased every year since the group was formed in 2006 from the merger of Boots and pharmaceutical wholesaler Alliance Unichem, with growth partly driven by further acquisitions. Turnover for 2011 was £23.3 billion, including £3.1 billion from joint ventures and associates, making Alliance Boots comfortably the UK’s biggest private company. Hornby was brought in by the group’s private-equity owner KKR after his ill-fated stint as chief executive at HBOS. During his time at Alliance Boots, the group launched online health website Boots.WebMD.com as well as making further inroads into continental Europe. The business increased its stakes in pharmaceutical wholesalers Andreae-Noris Zahn in Germany and Hedef Alliance in Turkey, with the latter offering access to Egypt and Algeria. More recently, a deal was struck with French supermarket Carrefour to help it develop beauty products, while Boots’s anti-ageing skincare range was launched in Italy and Spain in addition to the existing markets of France and Portugal. The company’s executive chairman, Stefano Pessina, was the founder of Alliance Santé, which merged with Unichem in 1997 to form the company that ultimately merged with Boots. Having invested personally in the KKR buyout in 2007, his stated aim is to take the Boots brand global, and the company seems well on the way, with a presence in more than 20 countries, including China. However, there has been another side to the company’s growth since the record-breaking £11 billion deal that took Alliance Boots off the stock market. The announcement of a three-year efficiency drive in October 2010 will lead to 900 job losses over three years, mostly from the company’s base in Nottingham where the first Boots shop opened in 1849. The company is also one of many to have recently scrapped final-salary pension schemes for its UK workers and replaced them with defined-contribution arrangements. There is £7.8 billion of long-term net debt left over from the buyout, which was the last European mega-deal before the credit crunch hit. Lower interest rates have helped to lessen this burden, and the company has remained profitable even after interest payments. Hornby’s departure has naturally created speculation over his successor. Alex Gourlay, chief executive of the health-and-beauty division, is a possible internal candidate, as is his opposite number in the pharmaceutical wholesale division, Ornella Barra, but whoever is selected will be expected to spread the Boots name wider than ever before.
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