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Longs snubs Walgreen bid

The drugstore chain cites antitrust risks. Its bigger rival vows to continue its pursuit.

September 18, 2008|Andrea Chang | Times Staff Writer

A corporate fight continued Wednesday over California-based Longs Drug Stores Corp., one of the last major regional drugstore chains, when it rejected a $2.8-billion offer by Walgreen Co.

Last week Walgreen, the largest drugstore chain in the country, made an eleventh-hour bid to scuttle a previously announced agreement in which CVS Caremark Corp., the second-largest chain, would pay about $2.7 billion for Longs.

In declining the offer, Longs, based in Walnut Creek, Ca., said it had concerns about potential antitrust risks and noted that Walgreen hadn't outlined a "clear road map" to acquire the company.

But Walgreen, based in Deerfield, Ill., said the battle was far from over.

"We are disappointed with the refusal of the Longs board to discuss our superior proposal," Walgreen spokesman Michael Polzin said. "Longs stockholders and the marketplace as a whole have demonstrated strong support for a transparent and fair process that more fully values the company. We remain committed to pursuing our proposal."

Longs operates 521 stores in four states, mostly in California but also in Hawaii, Nevada and Arizona. The chain also provides pharmacy benefit management services through its RxAmerica subsidiary.

Shares of Longs fell 2% to $74.79 on Wednesday. Shares of Walgreen fell 4.5% to $31.96. CVS shares fell 3.1% to $35.01.

John Ransom, an analyst who covers drugstores for Raymond James & Associates, said he was surprised that Longs declined Walgreen's offer, which at $75 a share in cash topped CVS' bid of $71.50 a share. Both chains said they would also assume Longs' debt of roughly $200 million.

"I think they had been through a process with CVS and feel committed to honor the deal they made," Ransom said. "It might just be that CVS has more experience making acquisitions. Walgreens has been more of a builder versus a buyer."


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