Overview: Fairweather friend?

Whenever a FTSE 100 company receives an acquisition bid, its finance director
comes under intense pressure to extract the maximum price from the potential
buyer. When the buyer is also the FD’s long-time colleague and close business
associate, the scrutiny and stress are even more extreme. That is exactly how
matters stand for Alliance Boots FD

What’s Happened?

Fairweather has been through one mega-deal already to end up in his current
position. The ICAS-qualified chartered accountant was the Alliance UniChem
finance head when the company decided to pursue a £7bn merger with high street
pharmacy Boots in October 2005.

Fairweather survived the board reshuffle that ensued after the deal went
through. Jim Smart, his counterpart at Boots, was out, leaving the path clear
for Fairweather to take his place on the board of the new company, Alliance

But things didn’t stay settled for long. At the beginning of March,
Fairweather was readying himself for another frenetic deal when deputy chairman
Stefano Pessina stunned the market with a bid, backed by the ‘barbarians at the
gate’, private equity firm Kohlberg Kravis Roberts, to take Alliance Boots
private for around £10bn.

Having worked with Pessina since joining the Italian engineer at Alliance
UniChem in 2002, Fairweather now finds himself having to mount a defence against
his colleague’s bid. The friend from the merger with Boots is now a raider who
has to be kept at arm’s length.

What’s going to happen?

The Alliance Boots board rebuffed Pessina’s original offer of £10 per share,
but agreed to consider a second offer of £10.40 per share for the company.

Things have exploded again since then, with the entry of private equity firm
Terra Firma, which has the backing of the UK’s largest charity, the Wellcome
Trust, into the bid race. Fairweather will be opening up the company books to
Terra Firma as it prepares a rival offer.

Where Fairweather ends up once the bids have run their course is anyone’s
guess. If Pessina is successful it is unclear whether Fairweather will stay on
at the company, given that he was not included in Pessina’s MBO. What will
happen to him if Terra Firma succeeds is equally uncertain. If Fairweather
thought the merger with Boots was testing, he faces an ever tougher challenge

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