The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, June 29 (Reuters Breakingviews) - Few UK high-street brands are as recognisable as pharmacy chain Boots, whose scientists discovered ibuprofen in 1961. But today the group is best known as a perennial M&A target. Australia’s Sigma Healthcare SIG.AX was the latest suitor, before it walked away on June 15. Price may have been a sticking point, as would-be buyers would inherit a number of ageing stores that could do with a revamp.

Walgreens Boots Alliance (WBA) tried unsuccessfully to offload the UK business in 2022. Though buyout shops including Apollo APO.N were interested, no one tabled a sufficient bid. Sources told Reuters at the time that Boots had been valued at as much as £8 billion. WBA was subsequently taken private by Sycamore Partners and longtime investor Stefano Pessina last year.

While Sigma Healthcare didn't disclose terms, the Financial Times reported a potential deal could value Boots at $10 billion (£7.4 billion). That looks more realistic now thanks to its improved performance. The company's accounts show operating margins reached almost 5% last year, up from under 1% in 2022. Revenue rose by over £1 billion in the four years to 2025, driven largely by a push into the high-margin beauty category.

Still, some work remains. Boots has refurbished certain flagship locations, but bankers told Breakingviews a chunk of the estate still needs upgrading, meaning buyers would have to factor that investment into any offer. Fellow retailers Tesco TSCO.L and M&S MKS.L are undertaking major refurbishments – with the former spending £1.5 billion in each of the past two years. That’s equivalent to around 2% of revenue, excluding VAT and fuel. Meanwhile, M&S’s capex number is closer to 4% of sales across the same period.

Assume Boots’ revenue grows by 3.5% this year, roughly the average growth rate it delivered in 2024 and 2025, and it should reach £7.8 billion this year. If refurbishment costs equal 3% of sales, the mid point of the aforementioned UK retailers, a new owner could expect to spend over £500 million if the initiative takes a few years to complete. That might make a £7.4 billion valuation look somewhat toppy.

Last year, Boots generated £743 million in EBITDA in 2025, on a margin of just over 9%. If recent revenue growth and margins hold, that could edge up to £755 million this year – implying the Sigma price discussions valued Boots at about 10 times EV/EBITDA. CVS Health CVS.N trades on a similar multiple, according to Visible Alpha, but its revenue has grown nearly twice as fast as Boots over the past two years, making comparisons strained.

Best-in-class UK retailers may be the more logical benchmarks. Tesco, for instance, trades on 8 times forecast EBITDA, per VisibleAlpha. Of course, suitors would need to offer a takeover premium to secure the business. An offer in the neighbourhood of £6.8 billion, or 9 times EBITDA, could theoretically leave room for store investments. The question is whether Boots’ current owners are willing to budge on price, or commit some cash themselves. If not, a London IPO could still be a possibility – but public markets won’t look favourably on a business in need of a face lift.

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CONTEXT NEWS

Australia's Sigma Healthcare dropped its pursuit of ‌UK pharmacy chain Boots on June 15, stating that a deal would not meet its strategic and capital investment objectives.

The withdrawal came a few days after Sigma confirmed the ​early-stage M&A talks, with the Financial Times reporting that the potential offer valued Boots at up to $10 billion. The newspaper also said negotiations with Canada’s Weston family, the owner of pharmacy chain Shoppers Drug Mart, had taken place before Easter.

In April, Reuters reported that Boots' owners ⁠were ​working with consultants on a strategy overhaul ahead ​of a potential London IPO as soon as 2027, which also included the possibility of a sale.