Walgreen offers $75 per share for Longs Drug, topping CVS proposal

New York, Sept. 12 - Walgreens announced it is offering $75 per share in cash for Longs Drug Stores Corp., beating by $3.50 the bid for Longs from CVS/Caremark Corp.

In total, Walgreens' proposal is worth around $3 billion, including the assumption of debt.

The Deerfield, Ill., drugstore operator said the offer is subject to regulatory approvals and due diligence.

The combination would provide substantial strategic and financial benefits, including strengthening Walgreens' ability to serve customers in fast growing markets and broaden its presence in the highly attractive Hawaii market, the company said.

"We believe the combination of Walgreens and Longs is a highly compelling transaction that is superior to the pending transaction with CVS/Caremark, accelerates Walgreens expansion into high growth markets and delivers meaningful cost synergies," said Walgreens chairman and chief executive officer Jeffrey A. Rein in a news release.

The company noted the price of $75 per share is a 39% premium to Longs' closing price on Aug. 12, before CVS unveiled its offer.

Walgreens also offered a $115 million termination fee.

Should asset sales by required by regulators, Walgreens is prepared to sell assets covering up to 40% of Longs' consolidated operating profit for the 12 months to Jan. 31, 2008.

It has been working with real estate investors Lubert-Adler Management Co., LP and Klaff Realty, LP, to address any potential store sales that may be necessary.

Walgreens also disclosed that it had previously offered up to $70.00 per share in cash for Longs in discussions, subject to the provision of due diligence materials. These materials were never provided, it added.

Walgreens added that it would prefer a negotiated transaction but is willing to go hostile if necessary and take the deal to shareholders directly.

Goldman, Sachs & Co. is financial advisor to Walgreens and Weil, Gotshal and Manges LLP is legal advisor.

Longs, a Walnut Creek, Calif., drugstore chain, agreed to be acquired by CVS, a Woonsocket, R.I., drugstore chain, in August, for $71.50 per share, or $2.9 billion including debt.

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