CVS Caremark acquires Longs Drugs for $2.9B
The CVS Caremark Corporation has signed a $2.9 billion deal to acquire the Longs Drug Stores Corporation, a retail drug store chain serving the West Coast and Hawaii.
Under the terms of the acquisition CVS Caremark will pay $71.50 per share in cash for Longs, which operates 521 retail pharmacies in California, Hawaii, Nevada and Arizona.
CVS Caremark will also acquire the company's Rx America subsidiary, which offers prescription benefits management services to more than 8 million members and prescription drug plan benefits to about 450,000 Medicare beneficiaries.
"This transaction provides tremendous benefits to CVS Caremark by accelerating our expansion in very attractive drugstore markets and strengthening our geographic reach," said Tom Ryan, chairman, president and CEO of CVS Caremark. "In fact, Longs has a significant presence in 10 non-CVS markets that are among the top 100 drugstore markets in the country. More than 490 of the stores we are acquiring are located in the central and northern California and Hawaiian markets, where Longs is a leading player. Longs' store network in these regions is excellent and is one that would take a decade or more for us to replicate through organic growth."
Longs owns the real estate associated with approximately 200 store locations, three distribution centers and three office facilities. CVS Caremark has valued the store locations at more than $1 billion and plans to monetize a substantial portion of these assets over time.
Company officials say the acquisition will provide a stronger position for the company as it rolls out its new suite of offerings under the Proactive Pharmacy Care model.
"Over the course of the last five years, we have transformed Longs into a stronger, more productive, more profitable company," said Warren F. Bryant, chairman, president and chief executive officer of Longs. "Given the changing industry landscape, we believe this combination is the logical next step for Longs. CVS Caremark has a strong record of successfully integrating drug store chains and pharmacy benefit services into its portfolio and working with employees to strengthen the performance, format and offerings of stores. We believe this will present excellent opportunities for our employees and ensure that our customers continue to receive excellent pharmacy care and high quality products."
CVS Caremark plans to finance the acquisition with a $1.5 billion bridge loan facility, together with existing cash and liquidity. The transaction is expected to be completed in the fourth quarter of 2008.
