Projo Biz Blog

CVS Caremark Corp. Chief Executive Officer Tom Ryan this morning said the drugstore chain won't raise its $2.7 billion offer to buy Longs Drug Stores Corp. even though some investors believe the price is too low.

CVS, based in Woonsocket, is "not moving" on its $71.50-a-share price bid, which Longs has agreed to, Ryan said today in an interview with CNBC.

Ryan spoke after Pershing Capital Management LP said it won't tender its shares in support of CVS Caremark Corp.'s $2.7 billion purchase of Longs Drug Stores Corp. because the offer undervalues the retailer.

Other drugstore companies and real-estate investment trusts might be willing to pay more than $71.50 a share for the company because of its real estate in California and Hawaii, Pershing's Bill Ackman wrote today in a letter to Longs Drug shareholders that was included in a regulatory filing.

"Longs is a collection of scarce and irreproducible assets," Ackman wrote. "This situation presents an ideal circumstance in which to conduct an open, competitive sale process."
CVS has started a tender offer to obtain Longs Drug shares, at least two-thirds of which need to be put forth. Pershing owns 3.1 million shares and has an "economic interest" in 9.2 million, or 26 percent of the outstanding stock.

Longs Drug recommended on Aug. 18 that shareholders approve the CVS takeover. Other investors, including Advisory Research Inc., which holds a 9.2 percent stake, have asked the company to provide information about the value of its real estate.

A "hypothetical analysis" was conducted to see if the retailer might generate more money for shareholders from the sale and lease-back of its real estate or other transactions than from the CVS purchase, Longs Drug said yesterday. That wouldn't be the case, the company said, without violating any provisions in the acquisition proposal.
Longs Drug didn't conduct an appraisal of the real estate after Advisory Research's request, saying it would add costs and might delay the combination with CVS.

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