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June 23, 2017

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Walgreen turns down inversion to cut tax bill

Walgreen plans to keep its roots firmly planted in the United States, saying it will no longer pursue an overseas reorganization that would have trimmed its U.S. taxes but drew political scorn.

The nation's largest drugstore chain — which bills itself as "America's premier pharmacy" — said Wednesday that it will buy the remaining stake in Swiss health and beauty retailer Alliance Boots that it does not already own.

The cash-stock deal is valued at more than US$15 billion. Walgreen had contemplated the move since buying a 45 percent share in 2012.

Walgreen will not pull off an inversion, however, a tactic that has become increasingly popular with U.S. companies seeking tax relief, but which has sparked growing backlash in Washington.

The pressure from investors remains intense, however, and shares of Walgreen tumbled sharply Wednesday morning, after the Deerfield, Illinois, company announced its plans and lowered its 2016 earnings goal for the combined company.

There have been 47 U.S. companies that have put together inversions through tie-ups with foreign businesses over the past decade, according to the Congressional Research Service.

Several others are planning or considering the move. Those including the drugmaker AbbVie, which last month announced a roughly US$55 billion combination with drugmaker Shire Plc, which is incorporated in the United Kingdom.

Walgreen, however, said it was not confident such a deal could withstand IRS scrutiny.

A spokesman also said its original agreement with Alliance Boots, which runs the United Kingdom's largest drugstore chain, also was not structured as an inversion, and that would have forced the company to essentially create a new deal.

Walgreen CEO Greg Wasson said the board and outside advisers weighed several benefits and risks, including the hard-to-quantify but significant potential for consumer backlash and political headaches.

Companies are facing a growing pushback from Democrats in Congress and President Barack Obama due to lost U.S. revenue from corporate taxes from inversions. On Tuesday, the Treasury Department said that it was considering actions that could limit the ability of companies to use the tactic.

Illinois Sen. Dick Durbin had sent a letter to Wasson urging him to reconsider an inversion and warning that the company may find

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