Walgreens to buck tax-inversion trend, remain in Chicago after merger
- Walgreens' Board of Directors announced on Wednesday that it would be seeking shareholder approval to acquire the remaining portions of UK-based Alliance Boots that Walgreens does not already own.
- Walgreens will be paying $5.27 billion in cash in addition to more than 144 million shares to buy the remaining 55% of Alliance Boots. It had paid $6.7 billion to acquire the first 45% back in 2012.
- Unlike other big-name mergers involving international components, Walgreens does not plan on shifting its domicile to the UK after the merger in order to pursue a lower corporate tax rate.
There has been an explosion of so-called tax-inversion mergers in 2014, including blockbuster deals such as Medtronic's $43 billion Covidien merger and AbbVie's $54 billion buyout of Shire. By relocating to Europe, these American companies are slashing their maximum corporate tax rate, which tops out at 35% in the United States.
Walgreens is bucking that trend with its Alliance Boots deal by choosing to remain centered in Chicago and Deerfield, IL. Walgreens president and CEO Greg Wasson explained some of the reasoning behind the company's decision not to shift its domicile. “[W]e 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," he said.
Walgreens also stated that it was being mindful of potential consumer backlash to an inversion deal in its press release. In essence, the company is trying to avoid scrutiny from the federal government as well as its customers -- likely a smart move considering that the Obama administration is considering unilaterally neutering the benefits inversions provide if Congress does not pass legislation to address the issue soon.
- Walgreens Walgreens Board of Directors Exercises Option to Complete Second Step of Strategic Partnership with Alliance Boots and Fully Combine Both Companies
- NYT Dealbook Walgreen Drug Store to Pay $5.27 Billion, Plus Shares, for Alliance Boots of Britain
- NYT White House Weighs Actions to Deter Overseas Tax Flight