WALNUT CREEK, Calif., and WOONSOCKET – Longs Drug Stores Corp. (NYSE: LDG), which late Friday received a $75-per-share offer from another bidder, has urged shareholders to accept the previous $71.50-per-share offer from CVS Caremark Corp. (NYSE: CVS).
“Our offer represents a full and fair price for Longs shares, and we stand firm on our price,” CVS Chairman, President and CEO Thomas M. Ryan said in a statement this morning.
CVS’ Aug. 12 bid to acquire the California-based retail and pharmacy benefits management (PBM) company, for a total of about $2.9 billion in cash and debt, already has cleared federal anti-trust hurdles. (READ MORE) But late Friday, rival pharmacy chain Walgreen Co. (NYSE, Nasdaq: WAG) announced a cash-and-debt offer of about $3 billion, subject to regulatory and other customary approvals. Walgreen also offered to pay the $115 million breakup fee for the CVS contract.
Either offer would include Longs’ 521 retail drugstores in Arizona, California, Hawaii and Nevada; the chain’s RxAmerica LLC subsidiary that offers PBM services to more than 8 million members and prescription-drug plan benefits to about 450,000 Medicare beneficiaries; and the real estate associated with about 200 stores, three distribution centers and three offices. The store sites alone have been “conservatively valued” by CVS at more than $1 billion. (READ MORE)
Longs’ two largest institutional investors, Advisory Research Inc. and Pershing Square Capital Management LP, have been urging the company to seek a higher bid, Bloomberg News said. And Longs’ shares – up more than 50 percent since the beginning of the year – have closed above the Woonsocket company’s bid nearly every day since the CVS-Longs deal was unveiled.
“We believe the combination of Walgreens and Longs is a highly compelling transaction that is superior to the pending transaction with CVS Caremark, accelerates Walgreens expansion into high growth markets and delivers meaningful cost synergies,” Walgreen Chairman and CEO Jeffrey A. Rein said in a statement on his company’s Web site. The Deerfield, Ill.-based retailer and PBM company is “prepared to move forward expeditiously and devote our full efforts and resources to promptly complete a transaction,” Rein added.
Walgreen said it “is working with Lubert-Adler Management Co. LP and Klaff Realty LP to address any potential store sales in connection with the transaction.” Goldman, Sachs & Co. is its financial adviser for the Longs offer, while Weil, Gotshal & Manges LLP is its legal adviser.
But Matt Kaufler, a fund manager Rochester-based Clover Capital Management Inc., which oversees $2.8 billion including more than 440,000 CVS shares, told Bloomberg News that the Walgreen offer might involve “some complexities associated with getting the transaction completed on a timely basis. [The Longs directors] just don’t think it’s worth the effort and the risk for $3.50-a-share more.”
That point also was raised today by Ryan: “the CVS Caremark’s offer has cleared all regulatory hurdles and provides certainty of completion to Longs shareholders,” he noted in his statement today. The Woonsocket chain today extended its offer until midnight on Oct. 15. “All other terms and conditions … remain unchanged,” CVS said.
CVS Caremark Corp. (NYSE: CVS) – the nation’s largest provider of prescription medications – operates the CVS/pharmacy stores; the CVS.com online pharmacy; Caremark Pharmacy Services; and the MinuteClinic retail-based health care subsidiary. Additional information is available at investor.cvs.com.
To learn more about Walnut Creek, Calif.-based Longs Drug Stores Corp. (NYSE: LDG) and its RxAmerica LLC PBM subsidiary, visit www.longs.com or www.RxAmerica.com.
To learn more about Deerfield, Ill.-based Walgreen Co. (NYSE, Nasdaq: WAG) – operator of the Walgreens pharmacy and Walgreens Health Services, a provider of specialty pharmacy, mail service, home care and PBM services – visit www.walgreens.com.
