Investor group wants auction for Longs
The battle over who should acquire Longs Drugs continues, as contenders CVS Caremark Corp.
and Walgreen Co.
stand firm on their offers.
An investment group, meanwhile, urges the Longs Drug Stores Corp. board to conduct an auction for the company.
Late Friday afternoon, Walgreen offered $3 billion, including debt, for the acquisition of Longs Drugs, topping the earlier $2.9 billion offer by CVS Caremark by $3.50 a share.
But Longs on Sunday issued a statement urging its stockholders to defer making any decisions on the Walgreen offer. While it confirmed the receipt of Walgreen's unsolicited offer, Longs says its board of directors continues to recommend that its stockholders accept the tender offer by CVS Caremark.
CVS of Woonsocket, R.I., meanwhile, extended its tender offer until midnight on Oct. 15.
Tom Ryan, chairman, president and chief executive of CVS Caremark, stood his ground on the original offer.
"Our offer represents a full and fair price for Longs shares, and we stand firm on our price," said Ryan. "Furthermore, the CVS Caremark's offer has cleared all regulatory hurdles and provides certainty of completion to Longs shareholders."
The CtW Investment Group of Washington D.C., sent a letter yesterday to Mary Metz, chairperson of Longs' governance and nominating committee, urging the board to hold an open competitive auction.
"Now that a potentially superior proposal has surfaced, we believe the Longs board must take immediate steps to cure this flawed process and ensure that shareholders receive full value for their investment," said Richard Clayton II, CtW's research director in the letter.
Longs also agreed to "lock-up" provisions in the CVS proposal, he said, without conducting an independent and full appraisal of its real estate portfolio.
He noted that in addition to its $75 a share offer, Walgreen also has accepted all anti-trust related risk up to 40 percent of Longs' net operating income, higher than the 30 percent threshold accepted by CVS.
CtW, a union pension advisory group, joins majority shareholders Advisory Research Inc. and Pershing Square Capital Management LP in urging the company to seek a higher offer.