Boston, MA 05/28/2014 (wallstreetpr) – Walgreen Company (NYSE:WAG) is reportedly considering a deal that would allow it to save millions of dollars on taxes. That deal involves reincorporating abroad, a move that is becoming popular among U.S. companies that seek to maximize shareholder value in low-tax environment.
Walgreen is negotiating a two-part acquisition of the British drugstore chain Alliance Boots. The acquisition of Alliance Boots could support Walgreen’s foreign incorporation ambitions. Reincorporation abroad through acquisitions is known as inversion.
Pfizer Inc (NYSE:PFE) is among the major U.S. companies in the drug business that are seeking opportunities to reincorporate abroad and more specifically in Europe where tax environment is considered favorable. Pfizer recently attempted to bid for AstraZeneca, a U.K. drug company in an effort to support its inversion maneuvers.
When the deal is too good
Inasmuch as Walgreen Company (NYSE:WAG) seeks to boost its earnings by moving its base into a country with friendly tax practices, shareholders are not unanimous in such maneuvers. It should be recalled that at a recent shareholder meeting in Paris, some shareholders urged Walgreen to consider reincorporating in Europe. However, one institutional shareholder believes that such a move would be detrimental in the long-run.
The CtW Investment Group, an investor that owns less than one percent stake in Walgreen and adviser several pension funds in the U.S., recently fired a concern letter to the management of Walgreen Company (NYSE:WAG). The investor expressed its reservations over a move to remove the company’s official base from the U.S.
The investor raised issues that range from the potential impact on the company’s share value because of the removal from prestigious indices such as the S&P 500 Index to complex regulatory framework in some European countries. Switzerland is particularly known for laws that give shareholders little influence on the management in companies incorporated in the country.
No comment
Walgreen Company (NYSE:WAG) has not come out clearly to state its position about incorporating abroad or remaining in the U.S. However, if pursuit of bigger shareholder value is anything to go by it is likely that the company might favor a move to settle its official base in Europe. In any case, several other U.S. companies have already moved into or are considering their way to as they seek to avoid the expensive U.S. corporate tax system.
