Exclusive: U.S. senator warns as Walgreen weighs overseas tax deal

WASHINGTON Wed Jun 25, 2014 5:01pm EDT

U.S. Senator Richard Durbin (D-IL) talks with reporters near the U.S. Senate floor at the U.S. Capitol during immigration debates in Washington, June 20, 2013.  REUTERS/Jonathan Ernst

U.S. Senator Richard Durbin (D-IL) talks with reporters near the U.S. Senate floor at the U.S. Capitol during immigration debates in Washington, June 20, 2013.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - As Walgreen Co, the largest U.S. drugstore chain, edged closer to potentially moving its tax home base abroad, the senior U.S. senator from its home state said on Wednesday that he hoped the company would not take such a step.

Illinois Democrat Richard Durbin told Reuters in an interview that he spoke with a Walgreen lobbyist on Tuesday. "I told him I hope that the rumor's not true," Durbin said.

Durbin, the Senate's second-highest ranking Democrat, said Walgreen, now based in a Chicago suburb, would be ill-advised to pursue an "inversion" deal with Switzerland's Alliance Boots Holding Ltd.

"Because of their national reach, they are a uniquely American company, and I think it would really hurt their image if they decided to give up on this country and to head overseas to make a couple extra dollars," he said.

A Walgreen spokesman declined to make an immediate comment.

With more than 8,200 drugstores in all 50 states, Walgreen has been under pressure from some of its investors to buy out the stake it does not already own in Alliance Boots and establish a new tax domicile in Switzerland.

Such tax-saving inversion deals, while still rare, are on the rise and are causing concern in Washington.

Durbin said he will introduce legislation on Thursday meant to keep multinational corporations from fleeing the United States for tax reasons and to reward those that remain U.S.-based, pay a fair wage and create U.S. jobs.

"I'm troubled by all the rumors that are flying about major American corporations that are prepared to give up on America to game the system and get a tax break overseas. I hope some of the rumors aren't true because some companies that I really respect are at least considering that possibility," he said.

A Reuters review showed that about 50 inversions have been done since 1982, with half of them occurring just since 2008.

Drugmakers have accounted for many of these recent deals, driven partly by tax considerations and partly by other factors, such as drug pipelines and locating of intellectual property. A Walgreen inversion would be a purer tax play, said analysts.

Walgreen on Tuesday withdrew its profit and revenue forecasts for 2016, saying it had yet to work out several aspects of its planned acquisition of Alliance Boots.

Walgreen bought 45 percent of Alliance Boots in 2012 and has an option to buy the rest in 2015. The U.S. company said it would update investors about the proposed purchase of the rest of Europe's largest pharmacy chain by late July or early August.

Chief Executive Greg Wasson said on a post-earnings conference call that any deal would be assessed for what it could do "as far as our effective tax rate."

Walgreen shares closed up 2.4 percent at $74.19 apiece in moderately bullish trading on the New York Stock Exchange.

(Editing by Marguerita Choy and Jonathan Oatis)

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Comments (1)
BGoldberg wrote:
What do these politicians expect these days. The Obama administration has proven to be way too intrusive re: the private sector and they have pretty much attempted to slam through as many rules and hurdles as they can. As if running a corporation is beholden only to some desire to fork over taxes to the feds to throw away overseas, or to pay wages to entry level workers that are not warranted based on skill or experience, or to just basically operate to please the federal government and its daily mantra of anti business agendas. It’s as if Obama has a pamphlet ready to go and says to businesses, here you go, this is my kingdom and here is your rule book, you are beholden to me. Really, I would never, ever open a brick and mortar establishment in America today. No way. Thought about it at one point, but there is no way I would put my money into a new business stateside right now. Just too many threats of ridiculous proportion. I’m just not able to pay an ice cream scooper $15 an hour, then pay a female ice cream scooper maternity leave, then pay her to take time off to care for her baby. Just no way I want to be forced into that. I know Obama’s out to get al the big guy corporations and make demands on them that are ill timed, but the little guy like me is the one feeling the trickle down affects of the push and shove routine Obama is obsessed with.
I really don’t blame companies for wanting to find ways to hightail their headquarters out of here. The environment for stateside operations has gotten to be too uncertain with too many what ifs.

Jun 25, 2014 5:03pm EDT  --  Report as abuse
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