Walgreens Backs Down After Threat Of Boycott
Note: On July 25th we joined the call for a boycott of Walgreens because they were going to become a foreign corporation to avoid paying taxes. Walgreens has now backed down from that plan and will remain in the United States. The people have more power than we realize, we need to exercise it. KZ
Walgreens Will Remain Headquartered in US After Planning Move Outside of the Country to Avoid Taxes
One of America’s biggest corporate names is poised to bow to intense US political pressure by retaining its headquarters in the US even as it secures a full takeover of Boots, Britain’s biggest pharmacy chain.
Sky News can exclusively reveal that Walgreens, the giant drug-stores group, will announce as soon as today that it plans to acquire the remaining 55% of Alliance Boots that it does not already own in a deal costing in the region of £5bn.
However, sources on both sides of the Atlantic said that Walgreens is likely to disclose as part of its announcement that it intends to remain a US-domiciled company rather than pursuing a so-called tax inversion which would involve moving its corporate headquarters to the UK or Switzerland.
The news will represent a significant victory for President Obama, who said recently that US companies which moved their headquarters overseas to save tax were damaging the country’s economy.
“My attitude is I don’t care if it’s legal, it’s wrong,” he said in July.
Tax inversions have become a contentious issue in the US in recent months, with Pfizer’s ultimately aborted £69bn offer for AstraZeneca the catalyst for a wave of deals involving American companies seeking to take advantage of lower overseas corporate tax rates.
Walgreens’ decision will disappoint many of its own shareholders, who have urged the group to exploit the estimated $4bn (£2.4bn) in tax savings over five years that it could reap by moving the company’s base to Switzerland, where Alliance Boots is headquartered.
Greg Wasson, Walgreens’ chief executive, and Stefano Pessina, a board member who orchestrated Boots’ corporate expansion during the last decade, met investors including Jana Partners and Och-Ziff Capital Management, two influential hedge funds, to discuss the issue in April.
Sources close to the deal said that Walgreens’ takeover of the rest of Alliance Boots would take place next year, probably during a previously agreed window between February and August 2015.
The remaining purchase price of $9.5bn (£5.6bn) is likely to adhere to a formula struck during the original 45% stake purchase in June 2012, which itself cost the American retailer $6.7bn (£4bn).
In a statement on Monday announcing the recruitment of Timothy McLevish, a former Kraft Foods executive, as its new chief financial officer, Walgreens said that he would “lead all of Walgreens finance functions as the company prepares to move forward with the proposed second step of its strategic partnership with Alliance Boots”.
Analysts speculated that his background at companies which had moved their corporate headquarters offshore meant that Walgreens was leaning in favour of pursuing an inversion deal.
The company which owns most of the remaining 55% of Alliance Boots that Walgreens will be purchasing is KKR, one of the titans of Wall Street’s private equity industry.
Walgreens is one of the US’s biggest retailers, operating more than 8,200 shops in 50 states, and by fully combining with Alliance Boots it will create a behemoth of the global drugs and consumer products industries.
Insiders said Walgreens’ board had decided that the intense political pressure on companies examining inversions could have a significant impact on its reputation among American consumers.
Walgreens and Alliance Boots declined to comment on Tuesday.