Recommended acquisition 20 April 2007

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Recommended acquisition of Alliance Boots plc by AB Acquisitions Limited a company controlled by certain funds advised by Kohlberg Kravis Roberts and by Stefano Pessina

Summary

• The board of directors of AB Acquisitions and the Independent Directors of Alliance Boots are pleased to announce that they have reached agreement on the terms of a recommended acquisition of Alliance Boots at a price of 1,090 pence in cash for each Alliance Boots Share, valuing Alliance Boots at approximately £10.6 billion. The price is inclusive of any final dividend to be declared in respect of the financial year ended 31 March 2007.
• AB Acquisitions is a newly incorporated company formed at the direction of funds advised by Kohlberg Kravis Roberts and Stefano Pessina for the purpose of implementing the Transaction. Stefano Pessina is the Executive Deputy Chairman of Alliance Boots and, directly or indirectly through entities wholly controlled by him, its largest shareholder, with an interest in 145,599,108 Alliance Boots Shares (approximately 15.05 per cent. of the issued share capital of Alliance Boots).
• Alliance Boots is an international pharmacy-led health and beauty group with a leading European retail pharmacy business comprising approximately 3,100 retail outlets (including associates) and a leading European distributor with a wholesale network of around 380 depots (including associates) serving around 120,000 outlets.
• The price of 1,090 pence for each Alliance Boots Share represents:
  1. a premium of 35.6 per cent. to 803.9 pence, being the average Closing Price per Alliance Boots Share over the one month ended 8 March 2007, the Business Day prior to Alliance Boots' announcement that it had received an approach; and
  2. a premium of 33.7 per cent. to 815 pence, being the Closing Price per Alliance Boots Share on 8 March 2007, the Business Day prior to Alliance Boots' announcement that it had received an approach.
• A Loan Note Alternative will be made available.
• AB Acquisitions has held amicable and constructive discussions with the trustees (or trustees' representatives) of each of the Alliance Boots Pensions Schemes. AB Acquisitions recognises the importance of ensuring that these schemes are prudently funded and is working to reach agreement with the trustees on the appropriate levels of funding for the schemes, including by way of additional contributions.
• The Independent Directors, who have been so advised by Goldman Sachs and Greenhill, consider the terms of the Transaction to be fair and reasonable. In providing their advice, Goldman Sachs and Greenhill have taken into account the commercial assessments of the Independent Directors. Accordingly, the Independent Directors intend unanimously to recommend that Alliance Boots Shareholders vote in favour of the Transaction at the Meetings (or, in the event that the Transaction is implemented by way of a takeover offer, to accept or procure acceptance of such offer) as nine of the Independent Directors have irrevocably undertaken to do so in respect of their own aggregate beneficial holdings of 223,550 Alliance Boots Shares, representing (as at the date of this announcement), approximately 0.023 per cent. of the existing issued ordinary share capital of Alliance Boots. Greenhill is acting as the independent financial adviser to Alliance Boots for the purposes of providing independent advice to the Independent Directors of Alliance Boots on the Transaction under Rule 3 of the City Code.
• It is intended that the acquisition will be implemented by way of a court-sanctioned scheme of arrangement under section 425 of the Companies Act. The Scheme Document will be posted to Shareholders as soon as reasonably practicable.
• Commenting on today's announcement, Dominic Murphy, Partner of Kohlberg Kravis Roberts, said:

  "Kohlberg Kravis Roberts is pleased to have received the Board's recommendation. Our objective is to work with Stefano Pessina and the existing management team to enhance Alliance Boots' position as a global leader in the healthcare services and beauty industries. Kohlberg Kravis Roberts is committed to building upon Alliance Boots' unique position as a trusted UK brand and retail institution and further developing the Group's existing businesses, both in the UK and overseas."

• Stefano Pessina, said:

  "The markets we serve are changing dynamically. We are committed to accelerating the development of Alliance Boots in order to meet the challenges and opportunities that we face and to build a successful global pharmacy-led healthcare and beauty group."

• Commenting on the Transaction, Sir Nigel Rudd, Chairman of Alliance Boots, said:

  "I have been privileged to chair one of this country's greatest retail brands and to have put in place the management team that has put this company back on the road to success. The formation last year of Alliance Boots created a hugely valuable business and this offer reflects that. I am delighted that the Board has been able to achieve such a good price for shareholders."

• UniCredit Markets & Investment Banking, JPMorgan Cazenove and Merrill Lynch are acting as lead financial advisers to AB Acquisitions. Citi has also provided financial advice to AB Acquisitions. JPMorgan Cazenove and Merrill Lynch are acting as corporate brokers to AB Acquisitions.
• Goldman Sachs International is acting as lead financial adviser to Alliance Boots. Greenhill is acting as independent financial adviser to Alliance Boots for the purposes of Rule 3 of the City Code. Credit Suisse and UBS are corporate brokers to Alliance Boots and have also provided financial advice to Alliance Boots.

This summary should be read in conjunction with the following announcement and the Appendices.

Appendix I sets out the Conditions and certain further terms of the Transaction. Appendix II contains source notes relating to certain information contained in this announcement. Appendix III contains certain details relating to the irrevocable undertakings given by Alliance Boots Directors. Certain terms used in this announcement are defined in Appendix IV to this announcement.

Enquiries:

Kohlberg Kravis Roberts /AB Acquisitions Tel: +44 (0)20 7839 9800
Dominic Murphy

UniCredit Markets & Investment Banking (lead financial adviser to AB Acquisitions) Tel: +44 (0)20 7826 1788
Edoardo Spezzotti
David Clark
Florian Potyka

JPMorgan Cazenove (lead financial adviser and corporate broker to AB Acquisitions) Tel: +44 (0)20 7588 2828
David Mayhew
Mark Breuer
Dwayne Lysaght

Merrill Lynch (lead financial adviser and corporate broker to AB Acquisitions) Tel: +44 (0)20 7628 1000
Richard Girling
Simon Mackenzie Smith
Jamie Heath

Gavin Anderson & Company (PR adviser to AB Acquisitions) Tel: +44 (0)20 7554 1400
Richard Constant

Alliance Boots
Donald McCabe (Media) Tel: +44 (0)20 7138 1164
Gerald Gradwell (Investors) Tel: +44 (0)20 7138 1169

Goldman Sachs International (lead financial adviser to Alliance Boots) Tel: +44 (0)20 7774 1000
Simon Dingemans
Nick Harper

Greenhill (independent financial adviser to Alliance Boots) Tel: +44 (0)20 7198 7400
James Lupton
Brian Cassin

Credit Suisse (corporate broker to Alliance Boots) Tel: +44 (0)20 7888 8888
Nick Bowers
James Leigh-Pemberton

UBS (corporate broker to Alliance Boots) Tel: +44 (0)20 7567 8000
Oliver Pawle
John Woolland

Finsbury (PR adviser to Alliance Boots)
James Murgatroyd Tel: +44 (0)20 7251 3801

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