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A lot of opportunities for this company: Activist investor

Walgreen's pending acquisition of Alliance Boots is ripe with opportunities, including the potential for lower taxes and stock buy backs, activist investor Barry Rosenstein told CNBC Tuesday.

The drug store chain is "an iconic brand but it's a company that's underperformed on an operating basis and on a shareholder return basis over almost every time frame you could look – 1 year, 5 years, 10 years," said Rosenstein, founder and managing partner of Jana Partners, an investment firm with $10 billion in assets under management.

However, with the takeover of Alliance Boots, Walgreen can implement much of the Swiss-based pharmacy chain's playbook, and "improve stores, improve product offerings, cut costs," he said. Alliance Boots' margin is roughly doubled that of Walgreen.

Read More Walgreens urged to leave US to gain tax benefit

There is also the potential for Walgreen to lower its taxable income if it reincorporates and relocates to Europe, something Rosenstein believes Walgreen "should clearly be looking at."

Barry Rosenstein, founder and managing partner of Jana Partners
Daniel Acker | Bloomberg | Getty Images
Barry Rosenstein, founder and managing partner of Jana Partners

Jana Partners was part of an investor group that met with the company's management in Paris last week to pressure the chain to consider the move, according to the Financial Times. The hedge fund owns over a billion dollars of Walgreen stock—its largest position.

If Walgreen did relocate in order to lower it taxes, it wouldn't be the first big company to do so. Applied Materials, a chip maker based in California, announced late last year it would merge with a Japanese rival and reincorporate in the Netherlands. Anheuser-Busch and several pharmaceutical companies have also reduced their tax bill by reincorporating.

Read More New corporate tax shelter: A merger abroad

Rosenstein also thinks the merger will allow Walgreen to buy back 15 -20 percent of its stock.

- By CNBC's Michelle Fox

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