Walgreen announces its plan to accelerate its purchase of European retailer Alliance Boots, and to keep its headquarters in the U.S. Reuters
Walgreen Co. said Wednesday that it would buy the remaining 55% of Alliance Boots GmbH that it doesn't already own for more than $15 billion, while the drugstore chain confirmed it would keep its headquarters in the U.S. and not pursue a so-called tax inversion overseas.
Walgreen said it decided to exercise its option to buy the rest of Alliance Boots earlier than the original option period of between February and August 2015. The company, which expects the deal to close in the first quarter next year, struck a deal to buy 45% of Alliance Boots in 2012 for about $6.7 billion.
Under the terms of the revised agreement, Walgreen will acquire the remaining 55% for $5.29 billion and about 144.3 million shares, worth about $10 billion, based on the closing price Tuesday.
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The fully merged company will combine leadership from both companies. Walgreen Chief Executive Gregory D. Wasson would have the same role with the combined holding company, which will be called Walgreens Boots Alliance Inc. Alliance Boots Executive Chairman Stefano Pessina will be the executive vice chairman of Walgreens Boots.
The new company will be based in the Chicago area and will have four divisions: U.S. drugstore chain Walgreen Co., U.K. and Irish pharmacy retailer Boots, a division focusing on pharmaceutical wholesale and international retail, and global brands. Boots operations will remain based in Nottingham, U.K.
Walgreen said Wednesday that it "thoroughly evaluated the possibility of combining Walgreens and Alliance Boots under a foreign parent company in an 'inversion' transaction," although the original deal didn't qualify under inversion rules. After examining "a wide range of issues," it decided not to pursue moving its headquarters outside the U.S.
"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 wrote in its news release.
A group of investors had pressured Walgreen to consider pursuing a so-called tax inversion overseas by relocating its headquarters to tax-friendly Switzerland, where Alliance Boots is based.
Walgreen's decision comes after the U.S. Treasury Department on Tuesday said it "is reviewing a broad range of authorities for possible administrative actions that could limit the ability of companies to engage in inversions, as well as approaches that could meaningfully reduce the tax benefits after inversions take place." President Obama had previously labeled inversions as "wrong" and called for congressional action to curb the action.
Chicago Mayor Rahm Emanuel, who once served as President Barack Obama's chief of staff, lauded the company for keeping its base in the city's metropolitan area. "Their decision today speaks volumes about their determination to be a strong business, good corporate citizen, and vital community neighbors," he said in a statement.
The Wall Street Journal had reported Tuesday that Walgreen would seek to buy the rest of Alliance Boots and remain in the U.S.
Walgreen on Wednesday also said it authorized a $3 billion share-buyback program that will run through the end of fiscal 2016, while it also boosted its quarterly dividend by 7.1% to 33.75 cents a share.
In addition, Walgreen established a new earnings goal for fiscal 2016 of $4.25 to $4.60 per adjusted share.
Write to Michael Calia at michael.calia@wsj.com