Boston, MA 04/22/2014 (wallstreetpr) – Walgreen Company (NYSE:WAG) is a $63 billion multinational organization that operates retail drugstores. The company could move its official headquarters to Europe in attempts to reduce corporate tax burden. Several institutional investors in the company are pushing the company to set base in Switzerland where corporate tax environment is considered favorable.
Several U.S. multinational companies are considering setting official headquarters in Europe to take advantage of favorable tax environment. The U.S. corporate tax system is not only considered high by investors, but also captures profits generated from overseas operations. As a result, multinational companies based in the U.S. end up losing a significant amount of their profits in taxes to the government, a trend that investors believe denies them rightful benefits from investment.
Switzerland, for instance, observes territorial tax system whereby it only imposes taxes on profits earned within its borders. The same tax system is observed in many other European countries. As a result, U.S. multinational companies believe they can maximize customer experience and enhance shareholder value by moving official headquarters to Europe.
As for the case of Walgreen Company (NYSE:WAG), analysts at UBS estimate that the company could significantly trim its tax burden by moving to Europe and as a result improve earnings per share by 75 percent.
Going foreign
In a move that could support its move to Europe, Walgreen Company (NYSE:WAG) acquired half of Alliance Boots for $6.7 billion in 2012. Alliance Boots is a Swiss-based company that provides beauty and health products. Walgreen intends to acquire the remaining portion of Alliance Boots next year in a deal that could cost $16.2 billion.
The acquisition is important as the company seeks to shift base to Europe. Moving official headquarters to Europe, or Switzerland for that matter, will require that at least 20 percent of the company be owned by foreign investors. That is possible for Walgreen given its stake in Alliance Boots.
In conclusion
Institutional investors and prominent hedge funds that own about 5 percent of Walgreen Company (NYSE:WAG) strongly believe that the shareholder value would be maximized if the company shifts official base overseas as that will lessen the tax burden.
