Walgreen Co. (WAG), the largest U.S. drugstore retailer, withdrew its financial goals for fiscal year 2016 as it considers buying the remainder of Alliance Boots GmbH and possibly moving overseas to lower its tax bill.
Walgreen purchased 45 percent of Zug, Switzerland-based Alliance Boots in 2012 for $6.7 billion, with the option to gain full control of the U.K.’s largest drugstore three years later. The companies are still deciding the timing and future structure of a combined company, which could affect its tax rate, Greg Wasson, chief executive officer of Deerfield, Illinois-based Walgreen, said on a conference call today.
That could mean moving abroad for tax purposes.
“That’s complex stuff,” Wasson said. “We are working around the clock to try to understand all the above so that we are able to make the right decision for the company.”
Walgreen will hold an investor call in about six weeks, once key decisions have been made, to provide new financial targets for the combined company, Wasson said.
A decision on where to keep its legal residence for tax purposes would come amid a spate of international moves by American health-care companies seeking lower tax rates and access to cash held outside of the U.S. that can come with a change in tax domicile.
The company is looking for the ideal cost structure and the ideal way to structure the transaction from a legal point of view, said Chief Financial Officer Wade Miquelon.
“We’re going to make sure we land in a place that’s in the best interest of our shareholders long-term,” he said.
Today the company also reported profit excluding one-time items of 91 cents a share for the quarter ended May 31, below the 94-cents-a-share average of 22 analysts’ estimates compiled by Bloomberg. Net income rose 16 percent to $722 million, or 75 cents a share, up from $624 million, or 65 cents a share, a year earlier thanks in part to lower taxes, Walgreen said in a statement.
Walgreen fell 1.7 percent to $72.48 at 4:15 p.m. in New York. The shares have risen 51 percent in the past 12 months.
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