Monday 17 September 2012

Boots breaks the 'silence' as it agrees deal with China firm

Alliance Boots, under the terms of a strategic alliance agreement signed yesterday, announced that it will acquire a 12% stake in Nanjing Pharmaceutical Company Limited, through a private placement, for a total consideration of approximately £56 million (RMB560 million), making it the second largest shareholder with Board and operational management representation.

Boots China profile
Nanjing Pharmaceutical Company Limited, which is listed on the Shanghai Stock Exchange, is the fifth largest pharmaceutical wholesaler in China with sales of around £2 billion (RMB20 billion) in 2011.
Alliance Boots first entered the Chinese pharmaceutical distribution market in 2008 through its Guangzhou Pharmaceuticals Corporation joint venture, which operates in complementary geographies and continues its successful development.

A powerful stepping-stone...
In all, with this latest move Boots is aiming at gaining a 20-30% share of the Chinese pharmaceutical distribution market. Apart from the inevitable appeal of adding a retail element in China asap, this major wholesale step is a clear indicator that even without the Walgreens’ tie-up, Alliance Boots is determined to pursue its policy of increasing its global reach and scale.

This will not only make it more influential in the Walgreens-Boots mix, but will be another step in making the company one of the most connected and centrally-run health & beauty operations in the world, at least in the short and medium term, say five years.

Impact on suppliers
This increasingly scalable company will continue to be heavily geared in a global economic environment. As a result there will be increasing pressure on the company to provide an exit strategy for its stakeholders via re-flotation.

All of this adds up to increasing power and influence in its relationships with suppliers, a position that will inevitably cause it to bring issues like prices & terms disparities, and especially absolute cost-prices to the negotiation table.

It hopefully goes without saying that any supplier wishing stay in the ring needs to factor the full global profile of W-B into the mix, fast.
….and if anyone, anywhere in your company still needs convincing of the obvious, why not run the numbers on Walgreens-Boots owning even 20% of global Health & Beauty retail & wholesale, with power to match…  

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