KKR’s Boots bolsters Turkish, Egyptian presence

Alliance Boots – the health and beauty retailer and pharamecutical distributor that was one of Europe’s most iconic buyouts of the credit boom years – is taking a controlling stake in Turkey’s Hedef Alliance.

The country’s demographics and growing population have increasingly attracted private equity investment, with the healthcare sector a particularly popular target. The Carlyle Group, Eurasia Capital Partners, Advent International, Cinven and Invest AD are among those that have struck deals in Turkey’s healthcare sector or have indicated a desire to do so.

The Kohlberg Kravis Roberts-backed Alliance Boots already owned a 50 percent stake in Hedef, but has now boosted its stake to 60 percent. It intends to gradually increase the stake to 80 percent over the next two years, according to a spokewoman.

Turkey is a fantastic hub for all of the region of the Middle East. Stefano Pessina

It is unclear whether funding for the deal would be provided by KKR’s private equity funds. A spokeswoman said funding would be provided by “existing capital resources within the group”, but declined to comment further.

Financial details were not disclosed, though a Financial Times report estimated the deal size at roughly £100 million without naming any sources.

“This is the first of a number of acquisitions where we can start to crystallise work we have done on the distribution side of the business,” Alliance Boots chairman Stefano Pessina reportedly told the Financial Times. “Turkey is a fantastic hub for all of the region of the Middle East. From Turkey we should be able to do deals with neighbouring countries.”

Alliance Boots’ backers have already invested £1 billion in the company, largely for development of its UK Boots pharmacy chain, according to the UK newspaper.

In addition to its Turkish operations, Hedef also owns a 50 percent stake in Egyptian pharmaceutical wholesaler United Company of Pharmacists. Hedef, which has more than 8,500 employees and 130 distribution centres, has consolidated revenues of roughly £2.4 billion, £1.9 billion of which relate to Turkey and the balance to Egyptian operations, according to a statement.

Purchased by KKR and Pessina for £11.1 billion in May 2007, Alliance Boots noted that Turkey is one of the fifteen largest pharmaceutical markets in the world and boasts a population of 72 million and growing.

Turkey's burgeoning private equity market will be the focus of PEI's second annual Turkey Forum in September.