Walgreen becomes the third major U.S. company to scrap its plans to relocate overseas in a bid to cut taxes. Fred Katayama reports.
Walgreen isn't moving, but its stock surely is. The drugstore chain is staying put in the U.S. instead of moving its headquarters to Europe to slash its tax bill. This marks the third time a possible tax inversion deal has fallen apart. Walgreen will, however, fully take over Europe's biggest pharmacy chain that it was hoping to use to make that tax move, Alliance Boots. Walgreen caved to public pressure and the odds that regulators wouldn't grant its blessing. In a statement that mixed patriotism with self interest, it said it was "mindful of the ongoing public reaction to a potential inversion and Walgreens unique role as an iconic American consumer retail company with a major portion of its revenues derived from government-funded reimbursement programs." Two groups opposed to inversion said the U.S. would lose $4 billion in tax revenue over five years if Walgreen were to move its headquarters offshore. The U.S. has one of the highest corporate tax rates among major countries. The Financial Times reports that the Obama Administration is examining ways to bypass Congress to curb such tax moves. Just yesterday, the Treasury said it was checking to see if it has the authority to limit inversion deals. Walgreen announced new buyback and cost cutting programs. But in a sign of just how much investors had been betting on an inversion deal, the stock plummeted further in early trading, adding on to yesterday's 4 percent slide. Despite negative investor reaction, SunTrust analyst David Magee said, "Net-net, we see these announcements as a positive. Alliance-Boots is going well, and the uncertainty overhang is done."