DEERFIELD, Ill. and WALNUT CREEK, Calif. Longs Drug Stores may have rebuffed Walgreens’ unsolicited bid to acquire the chain but Walgreens maintains that it will continue to move forward and is prepared to go directly to Longs’ stockholders.
“Our proposal is compelling—it would deliver superior value to Longs stockholders relative to the CVS transaction and can be consummated without undue delay. We again request that we be given an opportunity to conduct customary due diligence pursuant to the terms of your agreement with CVS as soon as possible,” stated Jeff Rein, chairman and chief executive officer of Walgreens, in a letter sent to Warren Bryant, Longs chairman, president and chief executive officer. “Although we would unquestionably prefer to work directly with you to complete a negotiated transaction, we are prepared to take our transaction directly to your stockholders.”
As previously reported by Drug Store News, Walgreens has come forward with an unsolicited, non-binding bid to buy Longs for nearly $3 billion in cash and debt assumption, a move that aims to quash a takeover agreement Longs management had already approved with CVS.
CVS announced in mid-August that it plans to buy for $2.9 billion, including debt, Longs’ 521 retail locations in California, Hawaii, Nevada and Arizona, as well as its PBM services. On Sept. 5, the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act expired, satisfying a condition to the closing of CVS’ offer.
While Walgreens’ offer, which is subject to regulatory approvals and the completion of due diligence, represents a $3.50 per share premium over the cash purchase price to be paid to Longs shareholders under the proposed acquisition by CVS, the bid from Walgreens immediately raised the eyebrows of several industry analysts given the likely regulatory hurdles and the potential for substantial store divestitures. It is apparent that Longs management also has its share of concerns.
Responding to Rein’s letter, Longs issued a statement early Tuesday stating that it still has no interest to furnish information to, nor have discussions and negotiations with Walgreens.
“As we indicated on Sept. 17, the Longs board of directors determined not to furnish information to, nor have discussions and negotiations with Walgreens. The Walgreens letter of Sept. 22 has no changes to its unsolicited, non-binding expression of interest,” Longs stated.
In making its determination, Longs board considered, among other factors:
- Walgreens previously reviewed the potential for a transaction with Longs and was not and is not now proposing to accept inherent regulatory risks.
- Walgreens has not presented a clear roadmap to completion. Assuming that regulatory approvals could be obtained, Longs’ management estimates the approval process could take nine to 12 months.
- Walgreens is not proposing to compensate Longs stockholders for delays in consummating a transaction. Meanwhile, CVS Caremark has already obtained all required regulatory approvals.
- Walgreens assumes limited antitrust risk and does not provide comparable certainly of consummation to the CVS transaction.
- Walgreens’ bid is a non-binding, conditioned on diligence and is not financed.