Boots merger with Walgreens approved despite calls for remedies from Wall Street

Despite tax campaigners and politicians welcoming the news, investors in Wall Street were unimpressed

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The £16bn mega-merger between Walgreens and Alliance Boots was given the green light by shareholders last night, leaving the two pharmacy giants on the brink of completing the deal almost three months ahead of schedule.

Shareholders in the US-based pharmacy firm Walgreens agreed to the takeover which will come into effect on 1 January and ends a two-year process that sees the UK Boots brand and US Walgreens control nearly 12,000 stores across the globe.

The company’s biggest shareholder, Stefano Pessina, who masterminded the deal, will become the interim chief executive of the newly formed firm while a permanent replacement is found.

The 73-year-old will take home potentially £3bn from the deal after buying Boots in a highly leveraged takeover in 2007. Along with private equity owner KKR, he invested £1.25bn seven years ago.

He becomes the newly formed Walgreen Boots Alliance’s biggest shareholder with a 16 per cent stake, in a deal that has already seen several Swiss-based Alliance Boots bosses join the Walgreens board, including highly rated UK Boots boss Alex Gourlay.

All sides have said Boots, which can trace its roots back 165 years, will remain on the high street with its headquarters in Nottingham.

Walgreens had initially considered moving the new group’s headquarters overseas to avoid high levels of tax in the US, in a so-called tax inversion scheme. However, bosses admitted they were worried with the negative publicity such a move could have.

Despite tax campaigners and politicians welcoming the news, investors in Wall Street were unimpressed, and sent shares plummeting 16 per cent after the announcement, wiping $10bn (£6.4bn) off the company’s value.

Around £5bn of Alliance Boots’ debt will be taken on by the new company.

Sources close to the company suggested that more than 90 per cent of shareholders approved the deal, but there was a vocal minority who felt the deal was not good value for money.

Dieter Waizenegger, executive director of the CtW Investment Group, warned: “Shareholders are left with too many unanswered questions about how the combined company will meet optimistic performance goals and how it will correct governance failures that became painfully obvious in the past year.

“There has been inadequate disclosure about the deal’s negotiation, the plans to obtain many touted synergies, and even who will lead Walgreens Boots Alliance. A $25bn transaction should never be a leap of faith for shareholders, but that’s exactly what this vote was.

“Going forward, we call for strong, independent board oversight, more disclosure, and better channels for long-term shareholders to make their voices heard.

“With Mr Pessina as the company’s CEO and largest shareholder, investors need a board with a stiff backbone now more than ever.”

The new company has already bought stakes in wholesale businesses around the world and is focusing on importing the success of Boots to Walgreen stores, which have been struggling in recent years.