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