* Obama administration says weighing options on inversions
* Democratic senators urge prompt action by White House
* Walgreen shares down after news of its retreat from deal
(Adds source confirming Walgreen decision, Treasury comments,
By Kevin Drawbaugh and Olivia Oran
WASHINGTON/NEW YORK, Aug 5 U.S. retailer
Walgreen Co on Tuesday backed away from a plan to
reincorporate abroad to cut its U.S. tax bill, while the Obama
administration said it was considering steps to curb such
corporate tax domicile-shifting deals.
Walgreen, the operator of the largest U.S. pharmacy chain,
will buy the 55 percent it does not already own of European
rival Alliance Boots, but the U.S. company will not use
the deal to move its tax domicile overseas, said a person
familiar with the matter.
Walgreen issued a statement late on Tuesday saying it will
announce "several updates" on its Alliance Boots at 6 a.m.
Eastern time (1000 GMT) on Wednesday, followed by a conference
call with management at 8 a.m. ET. The company said the updates
will cover "the transaction's timing and structure."
Walgreen's retreat will be the third major possible
"inversion" deal involving a major company to collapse in recent
months amid controversy, underscoring the complexity and
heightened political sensitivity in the United States of these
Walgreen had been under pressure from investors to do such a
deal as part of its buyout of Alliance Boots so that the U.S.
retailer's tax domicile could be moved to Switzerland or
But the company also faced criticism from Democratic
politicians, including the senior U.S. senator from its home
In an inversion, a U.S. corporation buys or sets up a
foreign company and then moves its tax domicile to that foreign
company and its home country, while leaving core business
operations in the United States. Doing such a deal ends U.S.
taxation of the company's foreign profits and makes it easier
for the company to take other tax-cutting steps.
Walgreen shares ended regular trading on Tuesday at $69.12,
down 4.4 percent.
A spokeswoman for Alliance Boots declined to comment.
TREASURY WEIGHS OPTIONS
Separately, the Obama administration said on Tuesday it was
considering administrative actions to discourage inversions,
given the failure of Congress to address the issue.
"Treasury is reviewing a broad range of authorities for
possible administrative actions that could limit the ability of
companies to engage in inversions, as well as approaches that
could meaningfully reduce the tax benefits after inversions take
place," a Treasury Department spokesperson said in an email.
The spokesperson added that there were limits to what
Treasury can do without action by Congress, and that
"legislation is the only way to fully address inversions."
Three prominent Democratic senators on Tuesday urged
President Barack Obama to use his executive authority to reduce
or eliminate tax breaks for companies that invert.
Nine inversion deals have been agreed to this year by U.S.
companies ranging from banana distributor Chiquita Brands
International Inc to drugmaker AbbVie Inc and
more are being considered. The transactions are occurring at a
record pace since the first inversion three decades ago.
But two large inversions recently collapsed: one involved
U.S. drugmaker Pfizer Inc ; and the other, U.S.
advertising company Omnicom Group Inc. Both had targeted
European rivals for acquisition, with a tax domicile move abroad
included in their plans, but the deals unraveled.
SENATORS URGE ACTION
Senator Richard Durbin, the second-ranking Senate Democrat,
along with Senators Jack Reed and Elizabeth Warren, said
immediate action was needed to stem these transactions, citing
concerns about fairness and the eroding U.S. corporate tax base.
Durbin, who is personally close to Obama, is from Illinois
and had publicly urged Walgreen not to go through with an
inversion. Obama himself formerly was a senator was Illinois.
Treasury Secretary Jack Lew has publicly questioned the
patriotism of companies that do inversions. "We are looking at a
very long list of possible ways to address the issue," he said
in an interview with The New York Times on Tuesday.
Inversions are still rare but are becoming more common. Of
the roughly 50 inversion deals done since 1983, about 40 percent
have been completed just since 2009 and more are being
finalized, with many others said to be in the planning stages.
Inversion deals are legal, and company executives who
arrange them say they are only trying to minimize the amount of
taxes the company pays, as investors expect them to do.
UK-based Sky News was first to report that Walgreen had
decided not to proceed with its planned reincorporation.
(Additional reporting by Esha Vaish and Ramkumar Iyer in
Bangalore; Greg Roumeliotis in New York; David Lawder, Mark
Felsenthal and Jason lange in Washington; Editing by Steve