Walgreen drops idea of moving overseas; Fiat chief says news reports hurt merger

Walgreens has becomes the third major U.S. company to no longer consider moving overseas in an attempt to cut taxes. (Reuters)
August 6
RETAIL
Walgreen drops idea of tax shelter

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 $15 billion. Walgreens 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 a growing backlash in Washington. The pressure from investors remains intense, however, and shares of Walgreen tumbled 14.3 percent to $59.21.

In an inversion, a U.S. company reorganizes in a country with a lower tax rate by acquiring or merging with a company overseas. Inversions allow companies to transfer money earned overseas to the parent company without paying additional U.S. taxes.

There have been 47 American companies that have put together inversions in the past decade, according to the Congressional Research Service. Several others are planning or considering the move, including the drugmaker AbbVie, which last month announced a roughly $55 billion combination with drugmaker Shire, incorporated in the United Kingdom.

— Associated Press

AUTOMOTIVE
Fiat chief: News reports hurt merger

Fiat chief executive Sergio Marchionne on Wednesday blamed overblown news media reports and a “lack of understanding” of the merger with its U.S. unit, Chrysler, for a share sell-off that threatens to blow the planned tie-up off course.

Marchionne wants to incorporate the two carmakers into Dutch-registered entity Fiat Chrysler Automobiles, paving the way for a U.S. listing key to help fund an ambitious investment plan at the world’s No. 7 auto group.

But the merger could still fold if enough investors decide to exercise a right to sell their Fiat shares triggered by the automaker’s decision to move its headquarters and fiscal domicile away from Italy, its home for the past 115 years.

“The press has overplayed the withdrawal rights scenario,” Marchionne told analysts during a conference call on Chrysler earnings, which rose 22 percent. “We are paying the price for an overreaction . . . based on a lack of understanding of what this means.”

Concerns over the merger’s completion triggered a sell-off that saw Fiat shares lose nearly 9 percent in the past two trading sessions.

Under the terms of the merger deal, dissenting investors can sell their shares for a cash exit price of 7.727 euros ($10.34), nearly 20 percent more than Wednesday’s closing price of 6.47 euros ($8.66).

Fiat has said if it has to put out more than 500 million euros ($669 million) to pay off shareholders and creditors, the merger would not go ahead.

— Reuters

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