Private equity firm mulls £10bn bid
Terra Firma, the private equity group headed by Guy Hands, is understood to be considering a£10 billion bid for Alliance Boots.

The retailer has already turned down a£9.7 billion approach from its deputy chairman Stefano Pessina, backed by KKR.

Terra Firma's interest is at an early stage. The private equity firm has held informal talks with bankers about financing a takeover, but has faced problems because so many big banks are already involved in other retail deals.

Pessina may yet come back with an improved offer. After his original approach was rejected, he was anxious for the situation to calm down so that it could be considered calmly. Pessina was a driving force behind the creation of Alliance Boots last year, when he merged his wholesale business with the retailer. However, he has since become frustrated with the City's lack of understanding of the company.

There has also been speculation that a third private equity house, Apax, may bid. However, a source close to Apax said that it was 'highly unlikely' it would become involved (Retail Week, March 23).