Whispers that US retail pharmacy behemoth Walgreens Boots Alliance is putting Boots up for sale suggests an interesting 2022 for Britain’s best-known high street chemist.

Speculation is swirling as to who might buy the 172-year-old health and beauty retailer, which would be valued at about £6 billion according to calculations from investment bank Cowen.

Walgreens Boots Alliance has stated its more pointed focus on North America and healthcare, so a Boots spin-off or IPO shouldn’t be ruled out. Neither should a sale to private equity or a trade sale to another retailer.

Shore Capital believes a wide range of businesses will take a good look at Boots, whose relevance as a healthcare provider and distributor has grown during the pandemic with the NHS under increased pressure.

In Walgreens Boots Alliance’s fourth quarter, Boots’ UK like-for-like pharmacy sales increased 11.4% year-on-year amid stronger demand.

Private equity funds would almost certainly be interested in Boots, while Asda’s owners, the billionaire Issa brothers backed by private equity firm TDR Capital, remain deal hungry and could be potential buyers.

Shore Capital points out the UK supermarkets ‘could harvest amongst the most significant benefits’ by buying Boots, although the biggest barrier to a potential acquisition by the supermarkets would be the unpredictable UK Competition and Markets Authority.

Nevertheless, the broker suggests Tesco (TSCO) and Sainsbury’s (SBRY) ‘should take a good look’ at Boots, noting that their respective CEOs Ken Murphy and Simon Roberts are both former Boots executives.

Supermarkets would have access to ‘synergies that a spin-out or a financial buyer that is not fusing Boots to an associated business do not’, notes Shore.

Boots is run by former Currys (CURY) boss Sebastian James, who is reversing years of under-investment in the store estate, shuttering underperforming sites and investing in modernising key outlets. Encouragingly, Boots’ fourth quarter digital sales more than doubled compared with pre-Covid levels.

Still a trusted brand in the UK, Shore Capital also flags Boots’ desirable position in the luxury fragrance market, which has been boosted by the demise of Debenhams and other department stores. As Shore puts it, Boots ‘enjoys the patronage’ of brands such as Chanel, Clinique and Lancome that are refused access to the supermarkets.

Boots is also believed to own 30%-to-40% of its 2,200-plus stores and holds more than 1,200 pharmacy licences. As the Government caps the number of licences for each local area, Boots boasts the predictable cash flows that are prized by private equity firms or which would certainly be attractive to supermarkets.

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