The US retailer activated its option to buy the 45 per cent of Alliance Boots it does not already own, but stressed it would not use the takeover to move its domicile overseas and cut its tax bill sharply.
The practice had come in for strong patriotic condemnation in America, from the president downwards. Barack Obama had even threatened to look at ways of legally curbing such deals that seemed to have financial opportunism at their core.
And it looks like Walgreens, based in Illinois, where the president was once the senator, decided a patriotic backlash from consumers on its home turf would not be worth risking for relocating its tax domicile to the UK or Switzerland via the Boots deal.
Walgreens noted the public and political opprobrium that collapsed two so-called tax “inversion” mega-deals in recent months: US drug giant Pfizer’s move on AstraZeneca, based in the UK and Switzerland; and American advertising major Omnicom’s bid to merge with Publicis of France.
Walgreens said explicitly yesterday that it was mindful of an adverse public reaction to a potential inversion deal, given the company’s “iconic” reputation in Main Street, USA. It may sound corny, but genuine for all that.
Not all have American corporates have been so sensitive. AbbVie, the US pharma group, has snapped up Irish/British drugs group Shire, with the intention of switching the combined entity’s tax domicile out of America to the UK.
Last June US medical device maker Medtronic agreed to buy Dublin-based Covidien and shift its HQ to Ireland.
However, particularly after Pfizer’s move on AstraZeneca, the mood music around such moves has become discordant. Walgreens deserves praise for pursuing the logical course of buying the rest of Alliance Boots for its strategic benefits, but without sparking distaste for blatant financial engineering.
Still a hole in the ‘recovery’
THE surge in house prices and car sales, contrasting with weaker industrial output data and pallid exports, is evidence we have far from a balanced economic recovery at the minute.
GDP may be forecast to grow at 3 per cent next year, but it is being driven by the sort of consumer bubble that laid us low before.
Anxiety should not be overdone, but such fears cannot be dismissed as the wailings of serial Jeremiahs. Stronger business investment and an exports lift are needed to allay such concerns.