Aug. 6 (Bloomberg) — Walgreen Co., the biggest U.S. drugstore chain, said it plans to buy all of Alliance Boots for about $15.3 billion and won't use the deal to move its tax address abroad.
Walgreen already owns 45 percent of Bern, Switzerland-based Boots, which has pharmacy and beauty stores in Europe. It will pay about $5.29 billion in cash and $10 billion in Walgreen stock for the remaining stake, the company said today in a statement. The stock fell 9.2 percent to $62.75 at 7:10 a.m. in New York trading.
Walgreen will remain based near Chicago. The company had previously considered moving its headquarters as a way to lower the rate it pays the U.S. government. The U.S. pharmacy chain has come under political pressure not to do a so-called tax inversion as other health companies, including drugmakers AbbVie Inc. and Pfizer Inc., struck or attempted deals to cut their own rates and leave the U.S.
Recommended For You
"A potential tax inversion has become a hot button topic in recent weeks as the company and a handful of outspoken investors have weighed the option," said Ross Muken, an analyst with ISI Group LLC, in a note to clients before the deal was announced. Moving overseas could have saved Walgreen at least $4 billion in taxes over five years, he said.
The company also announced a plan to buy back as much as $3 billion in stock and a quarterly dividend of 33.75 cents a share. Walgreen shares fell 4.2 percent to $69.12 yesterday in New York, the biggest one-day drop in more than a year.
Political pressure
Senator Richard Durbin, an Illinois Democrat, said in a July 22 letter to Walgreen Chief Executive Officer Gregory Wasson that should the company decide to go through with a tax inversion, management would be "turning your backs on the very people that have allowed Walgreen's to thrive and prosper."
Lawmakers in both major U.S. political parties have examined ways to stop the departures. The U.S. Treasury Department said yesterday it is examining whether it has the authority to stop companies moving overseas while it waits on Congress to pass comprehensive tax reform.
"We undertook an extensive and rigorous analysis with a team of leading experts to determine the most optimal – and sustainable – course of action," Wasson said in the statement. "We could not arrive at a structure that provided the company and our board with the requisite level of confidence that a transaction of this significance would need to withstand extensive IRS review and scrutiny."
Early option
As a result, the company decided it wasn't in the best interest of its investors to attempt to set up its tax address outside the United States, Wasson said.
Walgreen took a 45 percent stake in Alliance Boots for $6.7 billion in 2012 in an effort to build a global pharmacy chain. Walgreen had the option to gain full control of the chain within three years of that deal. The agreement announced today revised the original accord to enable Walgreen to make the purchase between yesterday and Feb. 5.
At 35 percent, the U.S. has the highest corporate tax rate in the developed world and is one of few countries that makes a company pay that rate on all the global income it brings home.
The combined company will be led by Wasson and blend senior management from both companies, according to the statement. Alliance Boots Chairman Stefano Pessina will be executive vice chairman responsible for strategy and mergers and acquisitions.
The company set an adjusted earnings per share goal of $4.25 to $4.60 for fiscal year 2016, which includes a target to cut costs by $1 billion by the end of fiscal year 2017.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
