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Company Bows to Shareholder Concern on Inversion Plan


The New York Times is reporting that Walgreens will buy Alliance Boots but will not be "inverting" to avoid paying US taxes.


Walgreen is near a deal to fully take over the British pharmacy retailer Alliance Boots — but will do so without moving its corporate headquarters abroad.


The American retailer is closing in on a deal to buy the 55 percent of Alliance Boots that it does not already own, a person briefed on the matter said on Tuesday. But the transaction, which could be announced as soon as Wednesday, will not include a move to relocate Walgreen‘s corporate citizenship to a lower-tax country.


Such a move, known as an inversion, would have required renegotiating the existing agreement with Alliance Boots, something the British retailer was unwilling to accommodate, this person said.

Following objections raised by shareholders, including a shareholder proposal by a LIUNA-affiliated pension fund calling for a policy that bars inversions, Walgreen Co. has decided to not to proceed with a plan to legally restructure as a Swiss company.


Companies which “invert” maintain the benefits of being based in the U.S., while slashing the amount of corporate taxes they pay. The scheme is estimated to cost the U.S. economy $20 billion in the next 10 years, according the White House.


“Walgreen Company’s decision to avoid a risky inversion plan is a victory for long-term investors,” said LIUNA General President Terry O’Sullivan. “The company’s inversion plan would have been bad for shareholders and bad for America; allowing them to avoid paying their fair share of taxes that support U.S. infrastructure, education, national defense and other crucial programs. As long-term investors, we were concerned about the impact on the reputation and value of the company.”


Incorporation outside the U.S. could make it more difficult for shareholders to hold a company, its officers and directors legally accountable in the event of wrongdoing. Many jurisdictions outside of the United States have much weaker shareholder rights.  In fact, in some countries shareholders have extremely limited ability to sue officers and directors derivatively, on behalf of the corporation.


In addition, reincorporation outside the U.S. carries the risk of removal from the S&P 500 and other stock indices which can affect a company’s stock price.


LIUNA-affiliated funds have been active since 2005 in overseas incorporation issues involving U.S. companies and are concerned about the long-term value of investments.

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Originally posted to The New Hampshire Labor News on Tue Aug 05, 2014 at 02:03 PM PDT.

Also republished by Chicago Kossacks.

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