Boots promised to return at least half the expected £1.25 billion proceeds to investors in an attempt to sweeten its fourth profits downgrade in a year.

Bayer, the German healthcare group; Reckitt Benckiser, the air freshener-to-Lemsip maker; and Pfizer, the world's largest pharmaceutical manufacturer, are also expected to bid in what is likely to be a hotly contested auction for Boots Healthcare International (BHI). The operation, which generates £545 million annual sales, is best known for its Nurofen, Strepsils and Clearasil brands. A prospectus is likely to go out to interested parties within the next few weeks, before a sale in early summer.

Analysts said GSK would be keen to add the Nurofen and Strepsils over-the-counter brands to its consumer business, although the drug maker would be less keen to take on BHI’s manufacturing facilities.

Paul Diggle, an analyst at Code Securities, said: “GSK is very clear about what it wants to do in the consumer area, which is to keep adding business on and stripping costs out.”

GSK bid for Roche’s OTC drugs business last year but lost out to Bayer’s SwFr3.6 billion (£1.6 billion) offer. At the time, several private equity players also lodged bids and analysts said last night that about three or four had commissioned due diligence reports on the sector as a whole.

That work may now be useful if, as expected, Boots tries to whip up interest from the venture capital sector as part of the auction process. Candover, Cinven, CVC Capital Partners, Hicks, Muse, Tate & Furst and Kohlberg Kravis Roberts & Co could all be interested in BHI.

GSK declined to comment.

The decision to sell BHI represents a U-turn for Boots, which has always described the division as “core”. Boots also announced plans for a £250 million sale-and-leaseback of 300 smaller stores to pay off debt.

However, the new strategy failed to distract attention from problems at the core Boots The Chemist chain, where a gloomy trading outlook prompted analysts to slash profit forecasts.

Merrill Lynch, Boots’s broker, cut forecasts for the year to March 2006 10 per cent to £440 million. A year ago the broker had expected profits of £605 million. In the fourth quarter of this year, sales rose only 0.7 per cent, despite a boost from an earlier Easter.

Richard Baker, the Boots chief executive, insisted that his strategy was right, blaming the slowdown on the general trading malaise. He said Boots had not lost market share despite slow sales in recent months and he believed shareholders were still supporting him. “We have had 18 months of really hard work and Boots today is much more competitive,” he said.

Leading shareholders said they were happy with the decision to sell off BHI but one questioned Mr Baker’s decision to invest in improving stores and IT systems in a tough market. “I think the jury is still out (on Richard Baker) and the board may face some hostile questions come the annual meeting,” he said.

One analyst said he believed Mr Baker had another six months to prove that his strategy was the right one before shareholders lost patience.

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