Scottish mogul snaps up Boots' eye surgery chain

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The Boots Group, Britain's largest drugstore chain, didn't even have a buyer when it announced this September that it would be closing all nine of its eye surgery centers by the end of the year.

After four years of nurturing its new eye centers, Boots said it was still losing $7 million a year on them and did not expect any profit in the foreseeable future.

A month later, presumably after some tough bargaining, Scottish eye mogul David Moulsdale announced he had bought and immediately taken over the entire Boots eye surgery chain, plus Boots' small dentistry business. The price was not disclosed, but the newspaper Scotland on Sunday described it as “next to nothing.”

The new purchase makes Moulsdale the largest eye clinic operator in Europe . He will consolidate the Boots centers with 20 others that he purchased in 2002 from another ailing British concern , Health Clinics, for $18 million, o r one-sixth of their previous value .

At Boots, a new executive team was relieved to return the company to its core business in drugstores, after losing $37 million this year corporate-wide .

“We have been noncompetitive and had to address this,” Boots CEO Richard Baker told investors after the announcement. “We're making Boots more modern, competitive and efficient.”

Two weeks before it announced its exit, Boots had been rocked by accusations in the Times of London that its eye centers were using defective lasers. The Times based its story on U.S. lawsuits against Boots' supplier, Hunenberg, Switzerland-based Alcon. Alcon says the newspaper misinterpreted internal company documents it had obtained.

Boots agrees with Alcon and insists that the Times' accusations did not prompt the company to abandon eye surgery, which was part of a broader exit that also included Boots' dentistry, chiropody and laser hair removal businesses.

The acquisition comes at a good time for Moulsdale. The Eye Laser Association reports that British eye surgery sales have risen by about 20%, after falling 30% to 40% in 2003.

“What we like is businesses that are underperforming,” Moulsdale said in a rare interview this March in Optician Magazine. “We believe that by a combination of integrating their head office with ours, improving the buying margin, motivating and enthusing the staff, and by bringing the marketing budgets together we can succeed.”

Moulsdale also said he is interested in the “synergies” of bringing together eye surgery with his 164 Optical Express optician shops. Prior to the Boots purchase, he was combining optical sales with eye surgery in some locations, making it possible to easily redirect eyeglasses customers to eye surgery.

Donal McCabe , a Boots spokesman, says his company never employed that strategy in its 150 optician shops, which Boots is retaining. McCabe says opticians were expressly barred from discussing eye surgery unless the customer brought it up.

Moulsdale is also trying to pump up eye surgery volume by offering discounts of $1,100 (£600) per eye, which are well below a more typical British rate of $1,800 per eye.

“Lots of people can't afford the higher prices for treatment, but many can afford £600,” he told Optician Magazine.

Profits for Moulsdale's holding company, DCM Optical Holdings, fell from $3.3 million in 2002 to $316,000 in 2003, but the Scottish entrepreneur seems to have limitless credit with Scottish banks, who keep financing a string of acquisitions, which is continuing.

In July, Moulsdale bought two eye clinics in Amsterdam and The Hague and announced plans to spread to the continent.

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