Boston, MA 06/25/2014 (wallstreetpr) – Walgreen Company (NYSE:WAG), the largest drugstore operator in the U.S., moved to withdraw its fiscal 2016 financial goals as it mulls a deal with the U.K. based drug retailer Alliance Boots. The company said it was considering several aspects of the planned deal, some of which include capital structure, costs savings and management structure.
The company owns 45 percent stakes in Alliance Boots. It acquired the stake in 2012. The company has the option to buy Alliance Boots in 2015 as that would boost its revenue, profits and expand its geographical coverage in Europe.
The company forecast revenue of $130 billion and profit between $9 and $9.5 billion in 2016, after purchasing Alliance Boots.
After pulling the original revenue and profit forecast for 2016, Walgreen intends to update shareholders about the planned acquisition in July or August, during which it will also provide a fresh forecast.
Reincorporating overseas
The acquisition of Alliance Boots is expected to help Walgreen Company (NYSE:WAG) to move its tax base from the U.S. to U.K., where corporate tax rates are favorable. Several U.S. companies have already shifted their corporate headquarters to tax havens in Europe or are making frantic efforts towards the same. For example, Horizon Pharma Inc (NASDAQ:HZNP) announced in March that it would purchase the privately held Vidara Therapeutic International in a deal expected to help it move its tax offices to Ireland. Moving tax bases away from the U.S. appears favorable to investors because it helps to reduce tax burden, thereby improving returns.
3Q report out of favor
Walgreen Company (NYSE:WAG) said its 3Q2014 profits increased 16 percent compared to a year earlier. The gain in the bottom line in the latest quarter was helped by lower income tax rate. The company reported adjusted earnings of $0.91 per share on revenue of $19.4 billion. Although the latest quarter showed improvement over the same quarter a year earlier, the performance fell short of Wall Street expectation, which was $0.93 per share on revenue of $19.44 billion.
Lack of clarity on the planned acquisition and the fact that the company failed to match Wall Street expectations in its 3Q2014 financial report saw shares of Walgreen Company (NYSE:WAG) down in the previous session. Shares of the company are up more than 26 percent this year.
