A couple weeks back I wrote about the thinking behind Medtronic’s decision to acquire Covidien and move its corporate offices to Ireland as part of a strategy to reduce its tax overhead. Like any money-saving trend, other healthcare and life sciences industry companies are following suit. Abbvie has made a play for Shire, albeit an unsuccessful one, and Pfizer attempted to acquire AstraZeneca. Forbes contributor Bruce Japsen sees Walgreens as the next potential U.S. company to join the inversion trend.
In this case, the drugstore acquisition of choice is Alliance Boots and the overseas headquarters would be in Switzerland. Two years ago, Walgreens (NYSE: WAG) took a 45 percent stake in the UK drugstore chain as part of a $6.7 billion deal with an option to gain control of the business in a three-year time frame. The size of Boots’ international footprint — 11,000 stores in 12 countries with 370 distribution centers for pharmacies, doctors and hospitals — would help Walgreens diversify its market reach well beyond the U.S.
Walgreens’ most recent earnings report posted this morning looks strong. Third-quarter earnings showed a 5.9 percent sales increase over the same period last year to $19.4 billion. Walgreens said in the statement that it will detail the company’s plans later this summer between July and August as part of its restructuring with Alliance Boots.
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But there’s some Congressional wooing going on by U.S. Sen. Dick Durbin (D-Ill) in an effort to keep Walgreens’ headquarters right where they are in Deerfield, Illinois.
The Illinois Democrat and No. 2 leader in the U.S. Senate and close ally of President Obama floated a bill this week he called the Patriot Employer Tax Credit Act that would offer a tax credit of approximately $1,200 per employee to corporations that kept their headquarters in the U.S.
As Japsen pointed out last year, the companies have already invested a lot of time and money setting up the deal. Walgreens’ Wasson also has told Forbes in response to news that the chief executive of Alliance Boots’ Health and Beauty Division would be coming to lead Walgreens’ Daily Living organization: “It is much more than just a personnel move…It is our continuing journey of putting these organizations together.”
Japsen added that one of the biggest questions Walgreens faces will be how it will contend with price pressure on pharmaceuticals.
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Although it still needs shareholder approval, having its corporate headquarters in Switzerland would lead to more money for shareholders down the road. It will be interesting to see if Durbin’s proposal turns any heads at the pharmacy giant.
