By Angela Chen
Walgreen Co. said Monday that its shareholders approved the
company's planned acquisition of the rest of European drugstore
chain Alliance Boots GmbH and the subsequent reorganization into a
holding company structure.
The move expands Walgreen, the largest American drugstore chain
by number of stores, from a U.S. operation with 8,200 locations to
a one with business in more than 10 countries and over 11,000 total
locations. The combined company will be called Walgreens Boots
Alliance Inc.
The companies have received all regulatory approvals, and the
acquisition and reorganization are expected to be completed
Wednesday.
The combination is aimed at giving the companies greater scale
and purchasing power at a time when lower drug-reimbursement rates
and higher costs for generic drugs are hurting profits.
Walgreen and Alliance Boots started a long-term partnership in
June 2012, when Walgreen acquired a 45% ownership in its European
peer for $6.7 billion.
The company then said in August that it would acquire the
remaining 55% but disappointed investors by eschewing a so-called
tax inversion, a tactic that involves using an acquisition to move
corporate headquarters to a tax-friendly locale, such as the U.K.,
Ireland or Switzerland. Such a move could have cut Walgreen's total
tax bill by a third but also attracted attention from the U.S.
government.
The reorganization will result in Walgreen becoming a wholly
owned subsidiary of Walgreens Boots Alliance. Its shares will be
converted on a one-for-one basis.
Walgreen shocked investors in August when it cut its long-term
profit forecast because it had failed to account for a rapid rise
in the price of generics as it negotiated contracts to offer
prescription drugs under Medicare's Part D program. But in its most
recently ended quarter, Walgreen said strong pharmacy sales and
cost cuts helped drive a 16% rise in profit.
Chief Executive Greg Wasson will retire after the merger.
Stefano Pessina, executive chairman of Alliance Boots, will serve
as acting CEO, pending a board search for a successor.
Shares of Walgreen are up about 33% this year.
Write to Angela Chen at angela.chen@wsj.com
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