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CVS to acquire Longs Drug to expand West Coast reach

It's a natural pairing, Longs' CEO says. For shoppers, it might mean fewer choices.

August 13, 2008|Andrea Chang and Conor L. Sanchez | Times Staff Writers

Drugstore chain operator CVS Caremark Corp., the largest provider of prescriptions in the country, said Tuesday that it would acquire Longs Drug Stores Corp. for about $2.6 billion.

Under the agreement, CVS would pay $71.50 a share in cash for Longs' 521 drugstores, which are in California, Hawaii, Nevada and Arizona, as well as its RxAmerica subsidiary, a prescription benefits management program.

The combination is a natural, Longs Chief Executive Warren F. Bryant said.

"Given the changing industry landscape, we believe this combination is the logical next step," he said.

The takeover would bolster CVS' presence on the West Coast and reduce the store choices for consumers.

"Why should we be forced to have only CVS as our drugstore?" said Jean Torre, a retired teacher, while shopping Tuesday at a Longs in Eagle Rock. "I'm against monopolies taking over because then they do whatever they want, charge whatever they want."

But Steven McCann, chief financial officer of Longs, said customers still would have plenty of options.

"While there certainly has been consolidation, there's also been a dramatic expansion in terms of the other channels that do carry prescription drugs," including grocery stores, mass retailers such as Wal-Mart and warehouse clubs, he said.

The company's stores in the continental United States would be converted to the CVS brand, but stores in Hawaii would retain the Longs name, McCann said.

Longs was founded by brothers Joe and Tom Long, who opened the first store 70 years ago in Oakland. The chain eventually spread out across the West.

After the deal is completed, CVS will operate about 6,800 drugstores in 41 states and the District of Columbia and will fill or manage more than 1.2 billion prescriptions a year.

Tom Ryan, chief executive of Woonsocket, R.I.-based CVS, said the deal would strengthen the company's geographic reach, especially in California and Hawaii, where Longs operates nearly 500 drugstores.

He said CVS would also acquire four distribution centers, Longs' headquarters facilities in Walnut Creek, Calif., and real estate valued at more than $1 billion for about 200 Longs store locations.

CVS said it planned to finance the acquisition with a $1.5-billion bridge loan facility, together with existing cash. Including the assumption of debt, the deal is valued at about $2.9 billion. The transaction is expected to be completed this year.

The deal was announced after the close of regular trading. CVS shares fell 3.6% to $36.70 after closing at $38.05, down 49 cents. Longs soared as much as 30% to $70.25 after finishing down $1.07 to $54.04.

While picking up vitamins at the Longs in Eagle Rock, Brian Bartelt, 29, a producer from Highland Park, said he preferred the drugstore to CVS because of its customer service.

"I'll imagine I'll get through it," he said of the sale, "but I do hope they keep up the quality."


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