Walgreens to buy up Alliance Boots

Boots shop, Oxford Street, London Walgreens bought a 45% stake in the company in 2012, and now wants to buy the remaining 55% stake

Related Stories

High Street chemist Alliance Boots is to be bought up by US pharmacy giant Walgreens.

The board of Walgreens will now seek shareholder approval for the £9bn deal to go through.

Walgreens bought a 45% stake in the company in 2012 and now wants to buy the remaining 55% stake.

The firm said it would not use the deal to alter its current tax structure, and expects the merged company to be based in Chicago.

Boots will remain at its UK headquarters in Nottingham.

Cost reductions

The pharmacy chain has long been a mainstay of the UK retail scene, with 2,487 stores across the country.

It employs more than 60,000 people in the UK, including more than 6,500 pharmacists.

The impact of the buy-out on jobs is not yet clear.

Walgreens has said it will look to make cost reductions of $1bn over three years at "corporate, field and store-level" across all of its businesses.

However, it will also invest "across core businesses at suitable returns to drive organic growth".

Walgreen Co.

Last Updated at 17 Oct 2014, 16:03 ET *Chart shows local time Walgreen Co. intraday chart
price change %
60.27 -
-0.12
-
-0.20

Walgreens shares slumped 14% on the New York Stock Exchange on Wednesday.

Investors had expected the firm to move its headquarters abroad in order to cut its tax bill.

"We are excited to move forward with the next important step in becoming a new kind of global health care leader," said Walgreens chief executive Greg Wasson.

The new combined company will be called "Walgreens Boots Alliance", and its headquarters will be in the Chicago area, Walgreens said.

Mr Wasson will become chief executive of the new company, and Stefano Pessina, who is currently executive chairman of Alliance Boots, will report to Mr Wasson.

Walgreens, which started out in Chicago in 1901, had 248,000 employees in 2013.

It has 8,231 shops across all 50 US states and the federal District of Columbia, Puerto Rico, Guam and the US Virgin Islands.

Tax plan ditched

Walgreens said it had thoroughly evaluated moving its headquarters abroad for tax purposes, but that the move would not have been feasible under current US tax rules.

A move would have put it at too much risk from scrutiny by the US tax authority, the Internal Revenue Service (IRS), the company said.

"We took into account all factors, including that we could not arrive at a structure that provided the company and our board with the requisite level of confidence that a transaction of this significance would need to withstand extensive IRS review and scrutiny," Mr Wasson said.

In addition, public opinion may have been against a move for tax purposes, the company added.

In May, pharmaceutical company Pfizer dropped a bid for UK company AstraZeneca following an outcry that it was partly motivated by a wish to buy the firm for tax reasons.

Being domiciled abroad is attractive for US companies because of the relatively high rate of US corporation tax compared with other countries.

Woman shopping in Walgreens US consumers are used to dozens of choices for the same basic drugs, like ibuprofen and cough medicine
line

Analysis

Kim Gittleson, BBC business reporter, New York

The first time I walked into a Boots in London, I was in search of something to soothe a scratchy throat - British dampness having taken its toll.

I scouted the shelves, only to be perplexed when there seemed to be just a handful of lozenges on offer. Could there really just be two generic brands for sale - not the dozens I was used to seeing on US pharmacy shelves?

This is not an uncommon experience for many Americans - and it is one reason why Walgreens, the US pharmacy chain that just snapped up Boots and its Swiss counterpart, distributor Alliance, does not seem to be interested in importing the Boots model wholesale to the US.

Rather, the company will test US appetites for British generics by importing a select few Boots brands, such as No7 and Botanics, to its US outlets, which include the Duane Reade pharmacy chain in New York.

In this way, it may avoid the disappointments so many other British imports have suffered - Tesco's recent effort with its Fresh & Easy chain of supermarkets comes to mind - while still taking advantage of the penchant that US consumers have for trying something new.

line

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    AMAZON JOBS Via Twitter Ben Thompson Business correspondent, BBC News Channel

    tweets: "Amazon to create 13,000 seasonal jobs in run up to Christmas. On busiest day last year, customers ordered 4.1m items - 47 every second."

     
  2.  
    09:07: SAP DOWNGRADE

    German software developer SAP has fallen 3.9% this morning in Frankfurt after letting on that 2014 profit will be lower than previously forecast. Services in the cloud are putting pressure on profits.

     
  3.  
    08:50: FORD INVESTMENT Radio 5 live

    Ford is investing about £200m at its Dagenham plant creating about 300 jobs to make diesel engines. Mark Ovenden of Ford is on 5 live. Engines are Britain's strength in vehicle manufacture, he says.

     
  4.  
    08:39: MARKET REPORT

    The FTSE 100 is behaving a bit oddly in early trading. It opened up 8 points this morning then promptly remembered the erurozone is teetering on the edge of a third crisis and there's less global economic growth out there and fell again. Now its up 3 points again at 6313.64 . The situation is a bit worse for Germany's Dax - down 52 points to 8797.85 - and France's Cac-40 - down 23 points to 4010.12.

     
  5.  
    08:28: TAX MARK

    SSE is touting its award of the new Fair Tax Mark, which has been set up to show companies are being open about what tax they pay. Other recipients include Go-Ahead Group , Midcounties Co-operative, Phone Co-op and Unity Trust Bank. Margaret Hodge, chair of parliament's Public Accounts Committee, said she hoped other companies would follow SSE's example.

     
  6.  
    08:16: PONTOON CYCLING
    Computer generated image of the floating cycle route

    Is the floating bike path a sustainable solution or an expensive distraction? We think you probably just need to look at the picture (above) for the answer to that question. But if you really feel the need to read about one of the more outlandish proposals being considered by Mayor of London Boris Johnson then by all means take a look. Some have baulked at the £600m price tag. But no doubt the team behind the 'Thames Deckway' thought "Boris. Keen Cycler, loves things that float (think airports), it's bound to be a winner."

     
  7.  
    08:00: SHIRE FINANCE CHIEF EXIT

    Drugs firm Shire has announced that interim chief financial officer James Bowling has resigned after ten years with the firm. He is joining Severn Trent as CFO and will leave Shire at the end of March 2015. Shire saw more than 30% of its share value wiped out last week after the collapse of a £32bn takeover from US rival AbbVie. Shire will start the search for a new CFO immediately.

     
  8.  
    07:45: SPIRIT PUB OFFER
    The badge of Greene King brewers on a pub wall

    Spirit pub company, which runs about 750 pubs, says Greene King has made a better offer to take the company over. They would get 0.1322 Greene King shares per Spirit share and a cash payment of 8 pence, worth a total of about 109.5 pence. Spirit's board says it may recommend the offer once a few details have been ironed out.

     
  9.  
    07:33: BUDGET GIVEAWAY?
    Chancellor of the Exchequer George Osborne

    Don't expect any traditional tax giveaways ahead of the general election. In a move akin to "good luck, there's no money left", Cabinet ministers have been warned by the Treasury that it is likely they will have to rein in their spending in the run-up to the election because of a shortfall in tax revenues and concerns about the global economy, the Financial Times has reported today. Treasury secretary Danny Alexander has told the Cabinet tax revenues are not recovering as quickly as the economy so he might have to impose new spending controls in the Autumn Statement. Yikes.

     
  10.  
    07:21: BANK OF JAPAN

    Japan's central bank has maintained its economic assessment for eight of the country's nine regions in its quarterly report, saying they continue to recover. The north-eastern Tohoku region cut its assessment from July, to say that the recovery trend is slowing.

     
  11.  
    07:07: IBM NEWS
    chip

    IBM says it will make a "major business announcement" today. Various newspapers including the Wall Street Journal think it will sell off its loss-making microchip-making business. IBM will pay Globalfoundries $1.5bn (£931m) to take the chip operations off its hands, says the WSJ.

     
  12.  
    06:50: UK GROWTH BBC Radio 4

    Peter Spencer, economic adviser to the EY Item Club, tells the Today programme housing investment along with business investment has been responsible for "about half of the economic growth" we have see in the UK since the start of the recovery. But people are beginning to worry about global growth and the UK's economic outlook. Concerns about economic developments at home and abroad has meant there are already signs of "a return to caution by both borrowers and lenders in the mortgage market".

     
  13.  
    06:35: STOCK MARKET TURMOIL BBC Radio 4

    Last week's stock market sell off is on the business agenda today. "Everyone was feeling nervous. We just need a very small straw to break the camel's back I think it was the Ebola virus," James Bevan chief investment officer at CCLA Investment Management tells the Today programme. "We had a lot of other things going on but I think Ebola was the thing that made investors say to themselves 'let's sit this one out'. There has been no real change in the hard economic data." He is worried about bond yields spiking "as they did in 1987" though.

     
  14.  
    06:24: EUROZONE ECONOMY Radio 5 live
    Jose Manual Barroso

    Jose Manual Barroso, outgoing President of the European Commission, has told the BBC he doesn't think another recession in the eurozone is likely. Official statistics suggest a "weaker recovery than anticipated. Elmar Brok, a German member of the European Parliament is on Radio 5 live and says Britain should be "more positive towards the eurozone"

     
  15.  
    06:13: INTERN PAY Radio 5 live

    Christian May from the Institute of Directors is on 5 live talking about employment reform, including reforms to how interns are paid, or otherwise. "It's worth considering it's unlikely to be a silver bullet," he says. There's a chance restrictions could be gamed to allow employers not to pay interns. While 25% of businesses have interns they don't pay, "in this day and age its getting difficult to justify having someone work for them and not paying them."

     
  16.  
    06:03: ETHICAL INVESTMENTS Radio 5 live

    Justin Urquhart Stewart of 7 Investment Management is on 5 live talking about ethical investment. "It's very badly marketed so people don't understand it ," He says. But because such investments strip out companies such as tobacco, alcohol, arms and oil, returns can also be slim.

     
  17.  
    06:01: Howard Mustoe Business reporter

    Good morning. Get in touch via email bizlivepage@bbc.co.uk and twitter @BBCBusiness.

     
  18.  
    06:00: Matthew West Business reporter

    Morning folks. It's a gloomy start to the day with the EY Item Club downgrading its 2015 UK economic growth forecast quite sharply this morning as a result of the global slowdown and uncertainty over interest rates. There's more housing market data out later and the Prime Minister is going to be pushing for more apprenticeships today too. We'll bring you more as it happens.

     

Features

From BBC Capital

Programmes

  • FishThe Travel Show Watch

    Meet the Helsinki market trader who sells fish to the President of Finland

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.