With political pressure mounting from the White House down, Walgreen Co. is poised to announce Wednesday that it will keep its corporate headquarters in north suburban Deerfield.
Walgreens is scheduled to hold an investor call very early Wednesday morning to discuss its acquisition of a smaller drug company, Alliance Boots, a deal that has been in the works for more than a year.
But according to several news reports, Walgreen Co. will not re-incorporate in Switzerland, where Alliance Boots is headquartered, a move that could have saved the company significantly in reincorporating in a nation with a lower corporate tax rate.
The re-incorporation — in which a company’s headquarters relocates overseas for tax purposes — is called a corporate inversion and has been a target of significant criticism, particularly from Democrats and led by Sen. Dick Durbin, D-Ill., who stood in front of a Walgreens at 410 N. Michigan Ave. on Tuesday evening to welcome the anticipated decision by the company.
“The CEO of Walgreens, Greg Wasson, has reached out to us and said he would like to speak to me in the morning. I am looking forward to his telephone call and the official announcement of Walgreens’ decision,” Durbin said.
“Published reports suggest Walgreens has decided to stay. That is great news for Walgreens. That is great news for America,” he added. “What we have learned the past several years is that the reaction of American consumers of this notion of America’s No. 1 pharmacy chain moving overseas has been met with a lot of resistance. There are customers across America and across Illinois who have been loyal to Walgreens for their entire lives and they believe Walgreens should belong in the United States.”
Walgreen Co. would not confirm reports that it will acquire the rest of Alliance Boots but will not move its headquarters to Europe for tax purposes, which Sky News reported citing unnamed sources.
“We have no comment at this time,” a Walgreen spokesman said in an email.
The company said in a press release that the investor call would relate to Alliance Boots and also would provide details on the transaction’s timing and structure, as well as the company’s future capital structure.
The potential Walgreens move made it particularly vulnerable to criticism because it’s a well-known retailer and an easy target for groups to rally against.
Durbin also had been critical of a deal that is moving forward with the pharmaceutical company AbbVie, which is headquartered in North Chicago.
On July 18, the boards of the drug makers AbbVie and Shire, headquartered on the island of Jersey, a British crown dependency that the U.S. regards as a tax haven, announced the firms would combine. AbbVie would create a new company, called “New AbbVie,” incorporated in Jersey, a transaction that AbbVie said could reduce its tax rate to 13 percent by 2016.
Durbin has been on a crusade against these foreign re-incorporations even though two of the major firms involved are based in Illinois. His latest move was on Tuesday, when he was joined by U.S. Sens. Elizabeth Warren, D-Mass., and Jack Reed, D-R.I. He sent a letter to President Barack Obama urging him to use his executive authority “to reduce or eliminate tax breaks associated with inversion.”
The senators asked the president to act even as they introduced legislation to preclude the tax breaks for companies.
“However, our efforts should not preclude executive action to prevent corporate inversions. The coming flood of corporate inversions justifies immediate executive action,” the letter said.
At a press briefing Tuesday, White House Press Secretary Josh Earnest sidestepped whether or not Obama would issue the order the three senators requested, which urges Congress to act. Congress, however, is out on summer break until after Labor Day.
“What we’re focused on right now is calling on Congress to take action on commonsense legislation that would close a loophole that many companies have benefitted from to avoid paying taxes to the U.S. government that they owe. Middle-class families certainly don’t have the opportunity to sort of capitalize on a loophole to remain in the United States of America and benefit from all of the resources of this country but claim some sort of outside exemption,” Earnest said.
Last month, Obama called companies that re-incorporate overseas to avoid taxes “corporate deserters.”
Durbin last month mocked Walgreen’s slogan, asking: “Is the ‘corner of happy and healthy’ somewhere in the Swiss Alps?”
He later told the Sun-Times “companies can’t have it both ways.”
“They can’t enjoy all the benefits of America and say, ‘We are checking out when it comes to taxes,’ ” Durbin said.