Walgreen, the largest U.S. drugstore operator, had initially considered moving its tax-base abroad in a tax inversion deal, which would have lowered its corporate tax rate from the U.S. 35% standard, one of the highest in the world. One ISI analyst estimated that an inversion would have lowered Walgreen’s tax bill by $4 billion over 5 years. But after an extensive review, and intense public pressure, the executive team, which had been pushed by activist investors to consider such a deal, nixed the idea, feeling that the inversion would not pass muster with regulators. Walgreen shares plummeted 9% in premarket trading.

“We could not arrive at a structure that provided the company and our board with the requisite level of confidence that a transaction of this significance would need to withstand extensive IRS review and scrutiny. As a result the company concluded it was not in the best long-term interest of our shareholders to attempt to re-domicile outside the U.S.,” said Walgreen CEO Greg Wasson. So Walgreen will remained headquartered in Deerfield, Illinois.

In an inversion structure, a U.S. company buys a foreign target and adopts its home country’s domicile or that of another foreign country with a lower tax rate. For a deal to meet regulatory requirements, shareholders of the acquired company must receive stock amounting to at least 20% of the resulting entity.

Walgreen, which competes with CVS Caremark (CVS) and Rite Aid (RAD), had admitted in late June is was mulling relocating its headquarters to Switzerland for tax purposes, in a move that would have been part of a recent wave of inversions: drugmakers AbbVie and Pfizer (PFE) have each recently struck or attempted deals that would lower their tax rates and see them move overseas.

But political pressure has risen of late. President Obama recently said inversions were “were wrong,” and on Tuesday, a Treasury Department spokeswoman said that it is looking into whether it has the authority and ways to that could limit the ability of companies to engage in inversions, and ways to reduce the tax benefits after inversions happen. One Illinois Senator recently wrote Wasson a letter saying an inversion deal was tantamount to Walgreen turning its back on Illinois.

Walgreen also referenced popular sentiment as a barrier to moving its headquarters abroad. The company has a “unique role as an iconic American consumer retail company,” it said in a press release, “with a major portion of its revenues derived from government-funded reimbursement programs.”

The $15.3 billion deal ($5.3 billion cash and about $10 billion in Walgreen shares) creates a worldwide drug purveyor with more than 11,000 stores across 10 countries, the company announced. It also establishes the largest pharmaceutical wholesale and distribution network with over 370 distribution centers catering to more than 180,000 pharmacies, doctors, health centers and hospitals in 20 countries. It is likely to give Walgreen more clout with drugmakers and suppliers, and reduce its costs as it fends off CVS, which in addition to its retail business, also operates a booming pharmacy benefits management company, Caremark.

Walgreen acquired its initial 45% stake in June 2012 for $6.7 billion and decided to sweep up the remaining share ahead of the original option period set for February through August 2015. The new global drugstore, which still faces shareholder and regulatory approval, will be headquartered in the Chicago area. The transaction is expected to close in the first quarter of 2015.

The senior team will blend leadership from both companies, establishing Walgreens’ Greg Wasson as president and CEO and Alliance Boots’ Stefano Pessina as executive vice chairman.

The combined company plans to find $1 billion in savings by the end of 2017 and is outlining a “Next Chapter” plan that will set strategic goals to achieve over the next three years.

WATCH: Walgreens buys out Alliance Boots
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This story has been updated throughout with additional information.