[Image of: RetailWire Logo and Tagline (for print)]

Should Walgreens move its HQ to Europe?

April 17, 2014

A group of shareholders who own close to five percent of Walgreens' stock want the company to use its takeover of Alliance Boots, headquartered in Switzerland, as the rationale to move its headquarters from the U.S. to Europe, reports the Financial Times.

The reason for the move would be to reduce Walgreens' taxable income in the U.S. According to a note by analysts at UBS, the rate Walgreens pays prior to deductions is 37.5 percent compared to 20 percent for Boots.

The group calling for the move, Goldman Sachs Investment Partners, Jana Partners, Corvex and Och-Ziff, called for a meeting with the company after becoming frustrated with management's refusal to consider relocation. According to the FT piece, Walgreens management is concerned about "political risks" that could be associated with moving its headquarters out of the U.S.

A Crain's Chicago Business article suggests that the debate on where the company is headquartered amounts to "a battle for control of the company." Next year, Walgreens is expected to exercise its option to buy the remainder of Alliance Boots. Should that happen, the executive chairman of Boots, Stefano Pessina, will become the largest shareholder of the merged company with a 16 percent stake. The investor group pushing for the move to Europe, according to Crain's, has more confidence in Mr. Pessina than Walgreen Co. CEO Greg Wasson.


Discussion Questions:

Should Walgreens move its corporate headquarters out of the U.S.? How would you expect a move to Europe to affect the way the chain is managed and its business in the U.S.?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you agree or disagree with investors who believe a move of its headquarters to Europe is the best course for Walgreens?


Boy, that's not going to go over well with customers at all. If I were CVS, I'd have a ball with that in my advertising campaigns.

I wonder a couple of things: 1) What is the actual tax percent Walgreens pays? 2) I can't believe the income it earns in the UK or EU is taxed in the US. After all, Apple and others are famous for booking income to Ireland.

I don't think consumer sentiment is on the side of this move, and strongly believe it would hurt Walgreens A LOT. After all, most of the time, to make a switch, consumers just have to walk next door to the nearest supermarket or across the street to the nearest CVS.

I find myself saying the following a lot lately: Just because you can do something, doesn't mean you should do something. Everything has consequences.

[Image of: View Braintrust Panelist button]
Paula Rosenblum, Managing Partner, RSR Research


Well, it all depends.

They could move their legal headquarters to Europe and gain the tax advantage while keeping the operational center in America.

In my experience it is less about where multi-national or global corporations are headquartered and more about the nationality of the senior management team. If, for example, you moved the headquarters to Rome but all the senior leadership remained American the odds are the company would still function as a U.S. company and so the impact would be minor.

[Image of: View Braintrust Panelist button]
Ryan Mathews, Founder, ceo, Black Monk Consulting

Why Europe? Why not Bermuda, the way Bacardi Rum did to avoid US taxes in Puerto Rico? The Caymans, British Virgin Islands and other no tax countries? I'm sure Walgreens and every other company has considered this from time to time and if the numbers worked, they'd do it.

Consumer sentiment would not be an issue. We already have several European retailers like Aldi, Delhaize, Ahold, IKEA, and Trader Joe's and I don't know of anyone who is concerned about the physical location of their offices.

David Livingston, Principal, DJL Research

I agree with Paula. This potential move is not going to sit well with the average consumer. I can understand the tax ramifications; but that is not enough to justify a move of this magnitude. How many people employed at Walgreens now at mid to higher level positions will be out of work?

The harm outweighs the benefits some of the wealthier investors will gain.

[Image of: View Braintrust Panelist button]
Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

The real issue here is the U.S. tax code that has the highest rates in the world, and is not competitive with alternatives.

Such iconic "American" companies as Starbucks and Caterpillar have relocated to take advantage of lower tax rates overseas. Other American companies such as Apple, Microsoft, IBM and Google have huge amounts of cash stashed overseas to avoid U.S. taxes.

In a global business environment, we need to recognize the capacity of companies to move money around to take advantage of favorable tax treatment and revamp our system to be more competitive.

Raymond D. Jones, Managing Director, Dechert-Hampe & Co.

It's the wrong question. The real question is, why are tax rates in the US higher than so many other places?


It's not just about the politics. I believe Walgreens has recently shown some struggles from overly invasive bureaucratic "arms-length" management. Moving HQ to Europe would most likely make that far worse.

That said, if the logic were that the biggest growth and profit opportunity resides in Europe, I might feel entirely differently - with the caveat that distance to HQ would weaken US business without question.

Doug Garnett, Founder & CEO, Atomic Direct

Raymond D. Jones is on target here with his comment. Too many people either choose to ignore, or have no concept of how federal and state taxes affect corporate health/profitability and from there store building, maintenance, hiring, innovation, charitable giving etc., until it's too late. I'd hate to see them move anywhere (especially from my home state and area where their influence and presence in the real estate market is significant), but one can see where the "investors" may be coming from.


Why not get the best of both worlds by looking at a financial structure with holding company HQ in most financially advantaged location and operating company HQs in locations close to the markets being served? Today's technologies and communications make this more reasonable that ever, with actual location of working executives being less important over time.

[Image of: View Braintrust Panelist button]
Verlin Youd, Managing Principal, Verizon

Here's another troubling example of the paradox of scale. The bigger the retailer, the greater the distance from headquarters to its stores. Moving to a low-tax haven in Europe would seem to epitomize this. Maybe it's a sign that the top of the corporation is already at a vast psychic distance from customers.

As Walgreens becomes more international, it must inevitably face decisions and pressures such as this one, as part of its responsibility to shareholders.

But putting the very valid tax considerations aside for a moment: What is this move going to accomplish for Walgreens shoppers? Will it make their experience better in any way? If top management can't - or won't - address these questions in a forthright manner, I'd vote "no" on my proxy.

[Image of: View Braintrust Panelist button]
James Tenser, Principal, VSN Strategies

At the corner of happy and healthy and tax-sheltered. A move would play very badly with Walgreens customers whether a total physical move, a partial physical move or just legal maneuvering to avoid taxes. U.S. consumers would not miss the irony of government initiatives to improve health care that benefit Walgreens and Walgreens diverting the profits elsewhere. As for the tax rates, shouldn't the discussion admit that few companies pay anything close to those rates and many pay less than half?


Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters