Confirmation by Alliance Boots earlier in the day that it had received a preliminary approach sent the shares up 14%, or 115p, to 930p by the close of trading, adding 1.1bn to the firm's market value.

The prospect of a private equity swoop for another high-street mainstay will intensify the growing political debate over the role of private equity in the wider economy. Earlier this week, the influential House of Commons Treasury Select Committee confirmed it will look into the industry amid claims that private equity is unfairly advantaged by tax loopholes and hides behind a veil of secrecy.
KKR is one of a trio of venture capital firms considering a formal bid for supermarket giant J Sainsbury, and rumours were circulating yesterday that Wm Morrison could be next in the sector's sights.

The bid approach came out of the blue and just eight months after Alliance Boots was created from a merger of equals between Boots and Alliance UniChem, which owned the Moss retail chain as well as being one of Europe's biggest distributors of healthcare and pharmaceutical products. Before the deal Boots had 126 outlets in Scotland and 5500 staff, numbers which increased to 280 outlets and more than 10,000 employees on the merger's completion.
Alliance Boots said in a statement: "Alliance Boots confirms that a preliminary and highly-conditional approach regarding a possible offer for the company has been received.

"
A statement from the bidding parties said: "KKR and Stefano Pessina confirm they have made a friendly approach to Alliance Boots at 1000p per Alliance Boots ordinary share in cash. KKR's and Stefano Pessina's objective is to work closely with the existing executive management team to achieve the long-term vision of building a global leader in the healthcare services and beauty industries."
The statement from KKR and Pessina made clear that there was no certainty an offer would be forthcoming, adding that the proposal required the completion of due diligence and a recommendation from the Alliance Boots board.

Pessina currently owns 15% of Alliance Boots.
One analyst said Alliance Boots fits a buy-out model, given its low debt, strong and stable cashflow and 700m of real estate.
Alliance Boots has around 2600 healthcare outlets in the UK, along with 400 pharmacies in Norway, the Netherlands, Thailand, Ireland and Italy.

The company's healthcare and pharmaceutical distribution operation - part of the former Alliance UniChem business - is based in 14 countries with more than 380 depots.
Boots struck the merger with Alliance UniChem after struggling to compete with increased competition from supermarket chains. Boots provided the merged party with an estate of more than 1400 stores in the UK in mainly high-street locations, while Alliance UniChem had 939 outlets close to surgeries and hospitals.

Richard Baker, chief executive of Boots, kept the same role in the enlarged business, while Pessina took on responsibility for strategy and integration.
Milan-born Pessina is a former nuclear engineer who turned his family drugs wholesale business into one of the most successful pharmaceutical empires in Europe. It was taken over by UniChem in 1997 but Pessina retained a hefty stake in the enlarged entity.

The merged company is aiming for 100m of annualised cost savings within four years, including about 60m within two years of the transaction.
Alliance Boots said in November it made a pro-forma trading profit of 267m in the six months to September 30 2006, on revenue up 2.9% to 7.

04bn. In January the group said it was on track to deliver full-year profits "in line with expectations".
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