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Shares of Longs Rise on Talk of Takeover

May 17, 2003|Hanah Cho | Times Staff Writer

Shares of Longs Drug Stores Corp. rose as much as 17% Friday amid speculation that the Walnut Creek, Calif.-based pharmacy chain may receive takeover bids, including one by supermarket giant Safeway Inc.

The latest edition of Business Week reported that Safeway is readying a bid, and an unidentified hedge fund manager told the magazine that a leveraged buyout group also is considering a takeover bid.

Longs closed up $1.24 at $15.48 in New York Stock Exchange trading after hitting $16.60 earlier in the session.

Longs executives did not return phone calls for comment. David Bowlby, a spokesman for Pleasanton, Calif.-based Safeway, said the company does not comment on rumors.

Longs, which operates 461 stores in six states, has seen its shares fall 50% in the last year as sales remained sluggish. The company said in February that it planned to lay off 170 people, mostly in California, after fourth-quarter profit slipped 71% to $6.4 million.

Although it's not unusual for supermarket companies to operate stand-alone drugstores -- Albertson's Inc. owns the Sav-On chain -- the same move would not work for Safeway, said Meredith Adler, an analyst for Lehman Bros. "I have a harder time seeing what the logic is in buying a drugstore chain," said Adler, who covers Safeway and Longs. "Safeway doesn't have a track record with stand-alone drugstores, and they have a bad track record with supermarket acquisitions. It doesn't make any sense."

Safeway, which owns 1,694 stores including Vons and Pavilions, is trying to sell its Dominick's Supermarket chain, which it bought for nearly $2 billion in 1998.

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