A 7-billion-pound ($12.4 billion) merger between British pharmacy groups Boots Group Plc and Alliance UniChem Plc is set to be formally announced on Monday morning, sources said on Sunday.
Barring any last-minute hitches as the management teams and their advisers thrash out the fine print, the two healthcare retailers will at 0600 GMT signal their intention to create a 2,500-store giant with combined sales of over 14 billion pounds.
"Were on track for an announcement on Monday morning," one source close to the deal told Reuters.
Both companies have declined comment, but several sources close to the matter have confirmed the broad details of the merger, which would still be subject to shareholder approval.
Another potential stumbling block - a counter-bid from a private equity player - would appear unlikely. While most of the major players have examined Boots as a potential take-over candidate, sources have told Reuters taking the company private does not currently make financial sense.
MERGER OF EQUALS?
While the deal will be billed as a merger of equals, Boots Chief Executive Richard Baker is expected to take the helm at the new company, while Boots chairman Nigel Rudd will continue as chairman.
Stefano Pessina, the executive deputy chairman of Alliance UniChem who owns 32 percent of the company and will have a 16 percent shareholding in the combined group, is likely to retain his current position and could be influential as an acknowledged safe pair of hands in business integration.
A merger would see the powerful Boots brand allied with the distribution expertise and network of Alliance UniChem, which is Europe's third-largest pharmacy distributor and has operations throughout western Europe and the middle east.
Although Boots has a significantly greater market value - 4.4 billion pounds versus 3.1 billion for Alliance UniChem - shareholders in the two companies will each be offered 50 percent of the shares in the merged entity.
But the deal will not include the ongoing sale of Boots Healthcare International (BHI), whose portfolio of brands including Neurofen, Clearasil and Strepsils is expected to raise between 1.4 and 1.5 billion pounds.
Most of the proceeds from the BHI sale - probably 1 billion pounds or so - will be paid to Boots shareholders, with the rest of the cash retained in the new company.
This would effectively offer Alliance shareholders a premium, but one source said this would be justified to Boots shareholders by the higher quality of Alliance's future earnings stream.
JOB LOSSES INEVITABLE:
Boots has around 1,400 outlets in the UK, mainly in prime high-street locations, while Alliance has about 1,200 smaller outlets, mostly in Britain, but also has a retail presence in Norway, the Netherlands and Italy.
The strength of the Boots brand - un underrated asset, according to many analysts - means that Alliance chemists in the UK are likely to be rebranded in time.
Although some job losses are inevitable, the complementary nature of the two networks in Britain means that these will be limited and mainly in distribution rather than on the retail side, one source said.
In common with many high-street retailers, Boots has struggled in recent quarters as high interest rates, mounting consumer debt and a stagnant housing market brought a protracted spending boom to an end.
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