Boots £5bn sale abandoned; Heathrow landing fees to fall; petrol at new record – as it happened

Time for a recap

Walgreens Boots Alliance has abandoned the sale of the Boots chemist chain, after market turbulence meant bidders couldn’t meet its expectations.

Sarah Riding, a retail partner at the law firm Gowling WLG, says:

“While disappointing news, it is right to set aside acquisition plans if the financial commitment cannot be met – the current and future value that incorporating the Boots brand would bring to any buyer is immense, given its strong domestic market and also its global reach.

It will be interesting to see if this opens the floodgates for other, more alternative buyers from the private equity market to consider an offer.”

The UK car industry has called for more help on soaring energy bills, and warned that uncertainty over the Northern Ireland protocol could hurt investment.

Heathrow has claimed that passengers will get a worse service, after the aviation regulator laid out plans to cut its landing fees over the next few years. Airlines, though, argued the charges were still too high.

Supermarket shoppers are turning to cheaper frozen foods as they watch “every penny and every pound”, according to the boss of Sainsbury’s.

The cost of living crisis has hit lottery ticket sales too, as cash-strapped customers rein in spending.

Abuse and violence towards shop workers and service staff is on the rise again, research shows, with a quarter of those reporting hostility blaming the cost of living crisis for putting increased stress on customers.

The AA has accused fuel retailers of ‘pump fiction’, after petrol prices hit a fresh record on Monday despite recent falls in wholesale prices.

The head of the European Central Bank has pledged to go ‘as far as necessary’ to cool rising prices. Christine Lagarde admitted inflation in the eurozone was “undesirably high”, but also played down concerns of a recession.

Consumer confidence in the US has been hit by rising inflation, while house price growth has decelerated a little.

Tram drivers in south London are holding a 48 hour walkout in a dispute over pay, just as Royal Mail postal workers receive ballots about possible industrial action too.

Stock markets have rallied, as China eased the Covid-19 restrictions on international arrivals.

The UK’s FTSE 100 is the highest in two weeks, up 92 points at 7350, with oil companies, miners and travel firms rising.

Fiona Cincotta, senior financial markets analyst at City Index, says:

Easing COVID restrictions, investors hope will improve global supply chain issues and help lower the possibility of a global recession.

Commodity prices rose on the news with iron ore and copper reversing losses while oil gained.

The National Bank of Hungary has startled the markets with a massive interest rate rise.

The NBH raised its base rate by a whopping 185 basis points to 7.75%, from 5.9%, far ahead of the 50bp rise which economists had expected.

The hike came after the forint plunged to a record low this week, while inflation keeps surging.

Rising inflation has knocked US consumer confidence to its lowest in over a year.

The Conference Board’s index of consumer sentiment dropped to 98.7 this month, from 103.2 in May, which is the lowest reading since February 2021.

The survey showed a sharp drop in consumers’ short-term outlook for income, business, and labor market conditions, to the lowest since March 2013.

“Consumer confidence fell for a second consecutive month in June,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

“While the Present Situation Index was relatively unchanged, the Expectations Index continued its recent downward trajectory—falling to its lowest point in nearly a decade.

Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices. Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by yearend.”

Stocsk have opened higher in New York, following gains in Europe.

The Dow Jones industrial average is up 309 points, or 1%, at 31,747 in early trading.

Energy stocks are leading the way, following a rise in the oil price, along with banks and industrial firms as recession worries ease.

House price growth across America has slowed a little, in what could be an early sign that the market is cooling.

Prices jumped by 20.4% in April compared with the same month a year ago, the S&P CoreLogic Case-Shiller Index showed.

That’s still a major jump, but slower than March’s 20.6%, as rising interest rates push up borrowing costs.

“April 2022 showed initial (although inconsistent) signs of a deceleration in the growth rate of U.S. home prices,” sayd Craig Lazzara, managing director at S&P DJI, who points out that price have surged across the US.

“We continue to observe very broad strength in the housing market, as all 20 cities notched double -digit price increases for the 12 months ended in April.

April’s price increase ranked in the top quintile of historical experience for every city, and in the top decile for 19 of them.

Prices across 20 of the largest US cities jumped 21.2% in the last year, up from 21.1% in the year to April:

In a remarkable development, auditing giant EY has agreed to a record $100mn settlement to resolve claims that dozens of its employees cheated on an ethics exam (!).

Our US business editor Dominic Rushe reports:

Ernst & Young, one of the world’s largest accounting firms, agreed to pay a record $100m to US regulators on Tuesday amid charges that dozens of its audit staff cheated on an ethics exam and misled investigators.

The Securities and Exchange Commission (SEC) charged that “over multiple years” EY’s audit professionals cheated on exams required to obtain and maintain Certified Public Accountant (CPA) licenses, and withheld evidence of this misconduct from the SEC’s enforcement division during an investigation of the matter.

SEC enforcement director Gurbir Grewal

“It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things.

“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct.”

EY says it has taken “thorough, extensive, and effective” action, following the unacceptable behaviour. More here:

Shares in Walgreens Boots Alliance are down 2.7% in pre-market trading, after it threw in the towel over its plans to sell Boots.

Neil Saunders, managing director of GlobalData Retail, fears Boots the Chemist will now be ‘treading water’:

It’s official, the £5bn sale of Boots the chemists has been abandoned, with its owner blaming ‘market instability’

Walgreens Boots Alliance has announced that it has decided to keep its Boots and No7 Beauty Company businesses under its existing ownership. after months of trying to agree a sale.

WBA blames the turmoil in the financial markets, which meant that interested parties couldn’t raise enough financing to make the deal fly.

It says:

WBA has been encouraged by productive discussions held with a range of parties, receiving significant interest from prospective buyers.

However, since launching the process, the global financial markets have suffered unexpected and dramatic change.

As a result of market instability severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots and No7 Beauty Company.

Consequently, WBA has decided that it is in the best interests of shareholders to keep focusing on the further growth and profitability of the two businesses.

WBA’s chief executive officer, Rosalind Brewer, insists that Boots, and the No7 Beauty Company, still hold ‘strong fundamental value’, but also suggests a deal could be done in the ‘longer term’.

It is an exciting time for these businesses, which are uniquely positioned to continue to capture future opportunities presented by the growing healthcare and beauty markets.

The Board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximize shareholder value for these businesses and across our company.”

Britons are shifting to cheaper food alternatives in their supermarket shopping as they try to navigate a worsening cost of living crisis, market research group NielsenIQ has reported today.

NielsenIQ reported that sales of frozen poultry are up 12% year-on-year, while sales of rice and grains increased 11%, canned beans and pasta were up 10%, gravy/stock up 9%, canned meat up 9% and dry pasta up 31%.

Overall shopping volumes fell 5.5% year-on-year, in the four weeks to 18th June, as customers tried to economise due to the rising cost of living. But despite buying less, shoppers spent 1.5% more.

There was also a big drop in online shopping compared to a year ago, when the UK was emerging from lockdowns. Online sales fell 12% compared with last year, with almost half a million fewer online shoppers than in June 2021

Mike Watkins, NielsenIQ’s UK Head of Retailer and Business Insight, says people are shopping around more to save money:

“It is no surprise that with budgets squeezed some households are less willing or less able to spend on a large online shop.

Moreover, with no restrictions on visiting stores, this is encouraging shoppers to shop around for the best prices as well as shopping little and more often to help manage the weekly food budget. Shoppers are starting to make different choices in how to compensate for their rising cost of living.

For some households, the way to save money is to buy cheaper products and our analysis suggests that some of the increased cost of an overall basket can be mitigated in this way³.”

Sky News are reporting that the £5bn+ auction of Boots the Chemist is being abandoned, as rough conditions in the debt-financing markets scuppered the sale.

After a process lasting several months, Walgreens Boots Alliance (WBA) has decided to retain ownership of Boots, Sky says.

Earlier this month, Indian billionaire Mukesh Ambani’s Reliance Industries teamed up with US private equity fund Apollo Global Management to make a £5bn bid.

But it appears that bidders were having problems financing a deal, at a time when global markets were suffering turbulence as recession fears rose.

Here’s the details:

The move, which could be announced as soon as Thursday when WBA is due to announce financial results to the New York Stock Exchange, is likely to cast doubt over Boots’ long-term prosperity under WBA’s ownership.

Banking sources said on Tuesday that the £5.5bn auction had faltered badly in recent weeks, with the only bidder to make a binding offer for Boots - a consortium of Apollo Global Management and Reliance Industries - pinning its hopes on the steadfastness of a quartet of lenders.

Growing concerns about the global economy have triggered severe doubts among the big banks which help finance leveraged buyouts, with Boots among the biggest such deals in Europe.

Our financial editor, Nils Pratley, wrote recently that the Boots auction lacked much buzz (rarely a good sign in the deal world...)

Roll up, roll up, who wants to buy Boots, a grand old name of UK retailing with 170 years of history under its belt? Not many people, it seems. Or rather, not many at a price the seller, the US group Walgreens, had hoped to achieve.

The reported joint bid of slightly more than £5bn from Reliance Industries of India and the US private equity fund Apollo is a long way short of where the rumour-mill had suggested the winning line would lie. Advisers had been trying to talk the price into £7bn-plus territory. There’s still time for the action to heat up (the ubiquitous Issa brothers of Asda and EG petrol forecourt fame are not formally out yet) but there’s an unmistakable lack of buzz around this transaction.

Chancellor Rishi Sunak has insisted he will carefully consider calls for a “more substantial” fuel duty cut, to help motorists with record costs.

Asked in parliament today whether he would “think again about the cut in fuel duty”, and consider a larger cut, Sunak replied:

“What I will say to him is of course I will take all his recommendations under advisement.

Sunak announced a 5p/litre cut to fuel duty in March, but the jump in wholesale prices since means it’s not being felt at the pumps.

Rising prices prompted the government to demand a review of the sector, by the competition watchdog.

Sunak added:

I want to reassure him that the Energy Secretary is in dialogue with the CMA (Competition and Markets Authority) to make sure that fuel duty cut is being passed on as well.”