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Walgreen's potential HQ move draws Dixon mayor's ire

Companies and CorporationsShareholdersRonald ReaganWalgreensCVS Health

— Dixon Mayor Jim Burke never knew Charles Walgreen, who grew up in this small western Illinois town and started what's now a multibillion-dollar, multinational drugstore chain.

But like others in Dixon, Burke is sure Walgreen, who died in 1939, wouldn't be pleased that the management of the company he founded is weighing a move out of Illinois in favor of Europe in a bid to cut its corporate tax bill.

"He would not have approved," Burke said Wednesday. "It's hard to believe he'd be in favor of moving their corporate headquarters to another country just to save money on taxes. I suggest the company re-examine its roots, and emulate the community spirit and values practiced by its founder."

Standing in front of the lone Walgreens store in Dixon, Burke blasted the company and its leadership for even considering the move, saying it would be an affront to its founder and his principles.

In Dixon, everyone knows of Charles Walgreen, who had a reputation as benevolent and community-minded, Burke said. His popularity here ranks second only to former President Ronald Reagan, who also grew up in town and acted as Walgreen's caddy on the golf course.

Walgreen left his mark all over town. He bought and donated 100 acres for Dixon's golf course, paid rent for a grass strip that is now the city's regional airport, and used personal money to prop up Dixon National Bank during the Depression, Burke said.

He also opened one of his first drugstores in Dixon, in 1904, and his family owns an estate on the edge of town, Burke said.

His company, which is the nation's largest drugstore chain, with more than 8,000 stores and $72 billion in annual revenue, is under pressure by shareholders to move its tax domicile to Europe once it completes its purchase, expected next year, of Switzerland-based Alliance Boots, a drug, health and beauty retailer.

Under such a move, Walgreen would be likely to retain its operational headquarters in Deerfield and retain much, if not all, its corporate staff.

Its U.S. stores, where it employs the vast majority of its workers, would most likely look much like they do now. And the company would continue to pay certain taxes in the U.S., including income, employer and property taxes.

Michael Polzin, a Walgreen spokesman, said no decision has been made on whether the company will pursue a tax inversion. A final determination of how it will proceed is expected by late July or early August.

"We will do what is in the best long-term interests of our shareholders, customers and employees," he said.

The pact to acquire Alliance Boots, made in 2012, will "advance America's worldwide competitive stance" by "providing access to new international markets for our products and services," Polzin said. "It is within that strategic framework that these issues are being considered."

But if the company goes through with the move, Burke and others in Dixon suspect backlash in their town and beyond.

Larry Dunphy, longtime owner of Books on First, a popular cafe and bookshop downtown, said he'd sell all his Walgreen stock and buy shares of rival CVS Caremark with the proceeds.

Ed Garland, a retired nuclear plant worker who works at the Dixon Correctional Center, said he thinks "it would be ridiculous" for Walgreen to re-domicile overseas, a move he labeled a "scam."

Garland, 60, visits the pharmacy regularly because it's on his way to work. If the company goes through with an inversion, "there are a lot of different pharmacies in town and I could go to any one of them," he said. "But probably not this one anymore."

Virgil Jensen, a Walgreen stockholder since the 1980s, said the public relations fallout "would be impossible to overlook."

Jensen, a retired businessman who said the company has been a good investment for him over the years, is worried that the short-term gain realized with an improved corporate tax rate may be offset by a loss in customers, revenue and share price.

"It's a big hurdle," he said. "I'm not sure it's in their best interest or the best interest of shareholders."

pfrost@tribune.com

Twitter @peterfrost

Copyright © 2014, The Baltimore Sun
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Companies and CorporationsShareholdersRonald ReaganWalgreensCVS Health
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