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The Shareholder Forumtm

independent review of issues relating to

Stock Buyback Policies


Walgreen Co.

for shareholder consideration in decisions about a

proposed merger into

Walgreens Boots Alliance, Inc.





For a printable copy of this report, click here.

Forum Report: Walgreen Stock Buybacks


Initial Comments on Walgreen Buyback Issues

Broader context
Management responsibility
Alternative research sources


Based on initial discussions, views of the “Issues to Be Considered” defined in Wednesday’s report[1] are generally consistent in their analyses of results, but clearly differ in how those results will benefit them. These positions may be summarized as follows:

Investors with long term equity or debt perspectives generally focus primarily on how a buyback policy will impact capitalization risk and corporate adaptability.

Most analysts and corporate finance professionals view buybacks as a potentially efficient alternative to dividends for distributing cash to shareholders, but not as a reliable means of investing in underpriced securities to improve a company’s capitalization.

Everyone, literally, recognizes the benefits of buyback commitments to shareholders with immediate interests in selling their positions or establishing portfolio valuations.

In private conversations, both corporate and fund managers reported discussing buyback commitments as a common and widely accepted means of winning investor support.

Broader context

Addressing broader capital market and corporate management concerns, the Financial Times columnist and former investment banker Andrew Smithers provided a very simple email statement of essential considerations for Forum participants, referring to his recently published commentary on the subject for more detailed explanations:[2]

…I think that the attention should be concentrated on the damage done to the economy by current management remuneration systems which encourage both low investment and high buy-backs.

If shareholders are concerned about the damage they are doing to the economy they should change their systems of management remuneration.

If shareholders are not concerned about this but merely about their own more direct interests the issue is whether they are long or short term investors.

Short term investors probably benefit from buy-backs, as they provide a buyer who is uninterested in the value of the shares to whom they can sell.

If they are long term shareholders the issue is not directly about buy-backs but whether management is being encouraged by the remuneration contracts to take risks with their companies' long term future by pushing up profit margins and pushing down investment.

While this program should remain focused on investor decisions relating to the specific Walgreen buyback issues, it is of course understood that these decisions must be made in the broader context of these observations.

Management responsibility

It should also be understood that we will consider the responsibility of a company’s management to be (a) conducting the business of the corporation and (b) assuring fair investor access to decision-making information. Traditionally, making a market for secondary trading in a company’s stock has been considered the responsibility of underwriters or other independent market makers. Whether the responsibility for supporting liquidity and valuation has shifted to the issuer or not, the Forum will support analyses based on the assumption that Walgreen's management is responsible only for developing the company's long term enterprise value and for explaining that to its shareholders.

Alternative research sources

On the subject of analytical standards, some of you have observed that nearly all the academic and professional research reports listed in the “Stock Buyback Policy” section of this program’s website present skeptical views of long term benefits.[3] We have in fact been trying to identify sources of alternative views, and any suggestions will be welcomed.


Inviting your continuing comments, I look forward to reporting the company’s response early next week.

GL – November 14, 2014

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335






This program is open to all shareholders of Walgreen Co. (WAG) and to any fiduciaries or professionals concerned with their investment decisions. Participation is free of charge, according to the Shareholder Forum's standard Conditions of Participation.

The purpose of the program is to define issues relevant to long term shareholder interests in the proposed merger of Walgreen Co. into Walgreens Boots Alliance, Inc., and to support an impartial review and access to information required for investor consideration of the issues. As stated in the Conditions, all Forum participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants. Forum polices are intended to support anonymous communication, and provide that participants will not be identified or quoted without their explicit permission.

Information requests and suggestions of issues that may be relevant to Darden shareholder interests can be addressed to the Shareholder Forum at


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