Projo Biz Blog

Longs Drug Stores Corp. recommended shareholders approve its $2.7 billion purchase by CVS Caremark Corp. even as activist investor Bill Ackman hired a firm to explore getting a higher price, according to Bloomberg News.

The Longs board endorsed the takeover in a regulatory filing yesterday. Ackman's hedge fund, Pershing Square Capital Management LP, has hired Blackstone Group LP to advise it, Ackman confirmed in an e-mail.

"It's a substantial premium to the stock prices a month before the announcement," said Dan Poole, senior vice president of equity research at National City Bank in Cleveland, with $34 billion in assets including 3.54 million CVS shares as of June 30."CVS is the only logical buyer. We expect the transaction to be completed at the stated price," Poole said today in a phone interview.

Ackman disclosed an 8.8 percent stake in Longs Drug on Aug. 5, a week before CVS announced its planned acquisition. CVS's $71.50-a-share offer was 32 percent higher than Longs Drug's close in New York trading that day.

Longs fell 49 cents to $71.50 at 4:15 p.m. in New York Stock Exchange composite trading. The shares surged 31 percent the day after CVS made its offer. CVS fell 31 cents to $38.28.

---