IBJNews

Walgreen turns down inversion, to keep HQ in U.S.

Back to TopCommentsE-mailPrintBookmark and Share

The nation's largest drugstore chain plans to keep its roots firmly planted in the United States, saying it will no longer pursue an overseas reorganization that would have trimmed the amount of U.S. taxes it pays.

Walgreen, as previously planned, said it will buy the remaining stake in Swiss health and beauty retailer Alliance Boots that it does not already own. It will not pull off an inversion, however, a tactic that has become increasingly popular with U.S. companies seeking tax relief, but which has sparked a backlash in Washington, D.C., and among the public.

The pressure from investors remains intense, however, and Walgreen stock tumbled sharply before the opening bell Wednesday. Shares fell $11.12, or 16 percent, to $58 each in pre-market trading.

Walgreen has more than 8,200 stores, including 202 in Indiana and more than 70 in the Indianapolis area.

There have been 47 U.S. companies that have put together inversions through tie-ups with foreign businesses over the past decade, according to the Congressional Research Service. Several others are planning or considering the move, including the drugmaker AbbVie, which announced last month a roughly $55 billion combination with Irish drugmaker Shire Plc, which is incorporated in the United Kingdom.

Walgreen, however, said it was not confident such a deal could withstand IRS scrutiny.

There is also an intensifying pushback from Congress and President Barack Obama due to lost U.S. revenue from corporate taxes from inversions.

And on Tuesday, the Treasury Department said that it was considering actions that could limit the ability of companies to use the tactic.

In an inversion a U.S. company reorganizes in country with a lower tax rate by acquiring or merging with a company overseas. Inversions allow companies to transfer money earned overseas to the parent company without paying additional U.S. taxes. That can help fund dividends and buybacks.

Inversions also can reduce a corporation's corporate tax liability in other ways and they provide some relief from the U.S. corporate tax rate of 35 percent, which is the highest in the industrialized world.

Walgreen Co. had drawn criticism for considering an inversion, in part because it receives a portion of its revenue through government funded programs that help cover the sick and elderly people. The company addressed that issue Wednesday.

"The company also was mindful of the ongoing public reaction to a potential inversion and Walgreens unique role as an iconic American consumer retail company with a major portion of its revenues derived from government-funded reimbursement programs," Walgreen Co. said in a statement.

Morningstar analyst Vishnu Lekraj said Wall Street had largely expected Walgreen to pull off an inversion, even though he thought there was a strong chance it wouldn't happen, in part due to public backlash.

Shares fell 6 percent after the company announced the decision, and fell further after it trimmed its outlook for the combined company in 2016

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

  4. No, HarveyF, the exact opposite. Greater density and closeness to retail and everyday necessities reduces traffic. When one has to drive miles for necessities, all those cars are on the roads for many miles. When reasonable density is built, low rise in this case, in the middle of a thriving retail area, one has to drive far less, actually reducing the number of cars on the road.

  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.

ADVERTISEMENT