WSJ: "WALGREEN TOPS CVS OFFER FOR LONGS"

DRUG RETAIL WARS

The Wall Street Journal has an article about Walgreen made an offer for Longs Drug Stores. CVS has previously made an offer to buy the Longs Drug Store chain. This offer was accepted and the deal was nearly completed.

NEW YORK -- Walgreen Co. made an offer late Friday to buy Longs Drug Stores Corp. for $2.8 billion, hoping to unseat a rival offer from CVS Caremark Corp. that Longs had already accepted.

Walgreens said it would pay $75 a share in cash to buy the California-based Longs, besting CVS's price of $71.50 per share, ...

Takeaway
Walgreen made this offer to force CVS to pay a higher price. This may or may not happen. The cost of this move is limited for Walgreeen. The more money CVS pays the less they have for remodeling and competing.

CVS may have to match the $75 a share offer. There is little possibility that Walgreen actually thought their offer could, would or will go through.

This move is intended to slow their fiercest direct competitor. Both Walgreen and CVS are in a battle against Walmart, Target, COSTCO, Kroger etc.

CVS TO ACQUIRE LONGS DRUG

CVS Caremark to Purchase Longs Drug for $2.7 Billion (Update3)

By Lauren Coleman-Lochner

Aug. 12 (Bloomberg) -- CVS Caremark Corp., the second- biggest U.S. drugstore chain, said it would buy Longs Drug Stores Corp. for $2.7 billion to expand its reach in the western U.S., closing the gap with larger Walgreen Co.

Longs Drug has 521 locations in California, Hawaii, Nevada and Arizona, giving CVS about 6,800 stores, in line with Walgreen, the Deerfield, Illinois-based chain with 6,849.

TAKEAWAY:

• CVS has been on a acquisition tear for quite a few years
• Walgreen's and CVS will have essentially equal number of locations if this dal happens.
  
• They seek to grow their store count
  
• This will allow for more efficient use of existing assets. Trucks, warehouses, distribution centers etc.

It will be interesting to see if there is antitrust scrutiny on this deal. CVS could make a strong case that all the supermarkets [most of which have in store pharmacies] that there will still be strong competitors after the deal.

What are your thoughts?