CtW Investment questions CVS Caremark's valuation of Longs Drugs

By Lisa Kerner

Charlotte, N.C., Sept. 3 - CtW Investment Group said it was disturbed by Longs Drug Stores Corp.'s decision not to reveal the value of its real estate portfolio as part of an undisclosed agreement with CVS Caremark Corp.

In a letter to Dr. Mary S. Metz, chairperson of Longs' governance and nominating committee, CtW called the decision questionable and said it believes "there are reasonable grounds to suspect that the current tender offer from CVS Caremark, which the Longs board has endorsed, undervalues the company's real estate assets."

Metz was urged to immediately disclose any such agreement to explain to shareholders why the board agreed to withhold information shareholders need to make a decision regarding the CVS Caremark offer.

CtW also noted in its letter that Longs' board has already made concessions in the negotiations, including a low-end price, a termination fee that exceeds the rule-of-thumb for transactions under Delaware law and limitations on seeking superior offers.

In addition to CtW, Pershing Square Capital Management and Advisory Research also questioned the valuation the CVS Caremark offer places on Longs' real estate portfolio.

According to CtW, CVS Caremark has conservatively valued Longs' buildings and land together at more than $1 billion. CtW believes the figure undervalues the real estate by 18% to 26%.

A fair value for Longs would be between $76.62 and $78.81 per share, said CtW.

CtW works with pension funds that hold Longs shares, according to the letter.

CVS Caremark agreed to acquire Longs, a Walnut Creek, Calif., drugstore chain, for $71.50 per share, it was previously reported.

Following the acquisition, CVS Caremark, based in Woonsocket, R.I., will fill or manage more than 1.2 billion prescriptions per year and will operate about 6,800 drugstores in 41 states and the District of Columbia.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.