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Walgreens pushing for full Boots takeover

Article By: ,  Financial Analyst
August 6, 2014 10:15 AM

Boots could soon fall into the hands of US owners as Walgreens presses on with its takeover plans.

The drugstore chain already owns a 45 per cent stake in Alliance Boots following a £4.3 billion purchase in 2012 which included the option to buy the remaining shares in three years. Walgreens has opted to activate this clause and is expected to confirm its final decision later today (August 6th). It will involve taking over the 55 per cent share in a deal worth around £5 billion.

While it is confident on its takeover plans, Walgreens has backed away from controversial plans to relocate its headquarters to Europe in a move that would reduce its tax bill. Alliance Boots, the group in control of Boots the Chemist, is based in Switzerland which has a tax rate of 20 per cent while Illinois, where Walgreens is headquartered, has a much higher rate of 37.5 per cent.

A potential move could draw criticism and it is believed that Walgreens is looking to avoid a political row that has the potential to damage the firm's reputation among its US customers. Even if the move would be accepted by its target audience and look favourable to investors, it is something that the board of directors may decide against.

Walgreens merger with Boots, expected to be completed in 2015, will create help to create a global health and beauty firm with over 11,000 stores across the world. It will allow Boots to expand in the US while giving Walgreens a firmer foothold in the UK.

The news of Walgreens' impending purchase of the remainder of Alliance Boots' shares saw the company make gains in its share price. The company experienced a 1.26 per cent boost in after hours trading on Wednesday and now sits at 69.99, an improvement on the 69.12 recorded on Tuesday.

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