Walgreens stays in the US after £9bn Boots deal
US pharmacy giant Walgreens yesterday ruled out plans to pursue a controversial tax inversion as part of its £9bn merger with Alliance Boots, amid fears that it would subject it to years of scrutiny from US tax authorities.
Walgreens is pressing ahead a £9bn deal to acquire the 55 per cent stake it does not already own in the UK’s biggest high street chemist after buying a 45 per cent stake in 2012.
Chief Executive Greg Wasson said that after “extensive and rigorous” investigation into moving its tax base to Europe, the new company Walgreens Boots Alliance would stay put, with headquarters near Chicago.
“We took into account all factors, including that 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,” Wasson said, adding that it had been “mindful of the ongoing public reaction” to tax inversion.
It comes after fierce criticism from US politicians and President Barack Obama, who has denounced tax inversions as “unpatriotic” and has urged Congress to stop them.
The deal will trigger a huge payout for Alliance Boots private equity owners KKR and Italian billionaire Stefano Pessina, who took the chemist private in early 2007 for £12.5bn in Europe’s biggest ever private equity deal.
Pessina will earn £1.5bn in cash and £2.95bn in shares and will become its biggest shareholder once the deal completes next year with a near 20 per cent stake worth around $11bn at Walgreen’s current share price.
He will become executive vice chairman overseeing M&A and strategy while Wasson will be president and chief executive of the overall group.
The two firms said they would exceed their cost savings target of $1bn by 2017 and generate $126bn to $130bn revenues by the end of 2016.