—Provides Outstanding Store Network
in Highly Attractive Central and Northern California and Hawaiian Markets—
—Broadens CVS Caremark’s
Geographic Footprint Facilitating Roll-Out of New Proactive Pharmacy
Care Offerings—
—Expands CVS Caremark’s
Position as the #1 Provider of Prescriptions in the U.S.—
CVS Caremark Corporation (NYSE: CVS) and Longs Drug Stores Corporation
(NYSE: LDG) today announced that they have entered into a definitive
agreement under which CVS Caremark will acquire Longs for $71.50 per
share in cash for a total purchase price of $2.9 billion including the
assumption of net debt. Through this acquisition, CVS Caremark will
acquire Longs’ 521 retail drugstores in
California, Hawaii, Nevada and Arizona as well as its Rx America
subsidiary, which offers prescription benefits management ("PBM")
services to over 8 million members and prescription drug plan benefits
to approximately 450,000 Medicare beneficiaries.
The addition of Longs’ valuable store
locations in Central and Northern California, Hawaii, and Nevada will
provide CVS Caremark with substantial market positions in these highly
attractive, fast growing markets. Further, the acquisition complements
CVS Caremark's substantial presence in Southern California and provides
a foundation for significant future growth throughout the nation's
largest state. The transaction also offers CVS Caremark immediate market
leadership in the highly attractive Hawaiian market, where it currently
does not have a presence, as well as high-quality locations in Nevada
and Arizona.
Significantly, Longs owns the real estate associated with approximately
200 store locations, three distribution centers and three office
facilities. CVS Caremark has conservatively valued the store locations
alone at more than $1 billion. These stores are located in markets where
commercial real estate values are among the highest in the country and
prime locations are especially difficult to acquire. CVS Caremark
intends to unlock the intrinsic value of these locations, as well as the
distribution centers and office facilities, by monetizing a substantial
portion of these assets over time.
With an enhanced national reach, CVS Caremark will be in a stronger
position as it rolls out its new suite of offerings under the Proactive
Pharmacy Care model, taking advantage of its retail and PBM services.
Tom Ryan, Chairman, President and CEO of CVS Caremark, commented, “This
transaction provides tremendous benefits to CVS Caremark by accelerating
our expansion in very attractive drugstore markets and strengthening our
geographic reach. In fact, Longs has a significant presence in ten
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.
“With this acquisition, we will increase
accessibility to our pharmacies for consumers and put us in an even
better position to grow our new Proactive Pharmacy Care offerings with
our PBM clients. We are very excited about the potential offered by this
combination and the opportunity to build on our strong track record of
acquiring and successfully integrating PBMs and retail drugstore chains,
and we expect this integration to be seamless.
“Over the years, I have been very impressed
with the strong customer loyalty Longs’
employees have earned throughout the West Coast and Hawaii, as well as
the high quality of Longs’ stores in these
markets. We look forward to completing the transaction and welcoming the
talented Longs associates to our company,”
Mr. Ryan concluded.
Warren F. Bryant, Chairman, President and Chief Executive Officer of
Longs, stated, “The transaction represents an
excellent opportunity for Longs to deliver significant and certain value
to its shareholders while positioning its stores to thrive in the future
for the benefit of its employees and customers.
“Over the course of the last five years, we
have transformed Longs into a stronger, more productive, more profitable
company. 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.”
Longs generates annual revenues in excess of $5 billion, consistently
strong operating cash flow, and reported EBITDA in the last 12 months of
approximately $276 million. Assuming completion of the transaction in
the fourth quarter of 2008, the acquisition is expected to be dilutive
to earnings per share in the first year, and accretive to EPS beginning
in 2010. CVS Caremark expects to achieve significant cost synergies of
approximately $100 million in 2009 and approximately $140-$150 million
in 2010, resulting from purchasing efficiencies and a reduction of SG&A
expense.
The combination will expand CVS Caremark’s
position as the #1 provider of prescriptions in the U.S. Following the
acquisition, CVS Caremark will fill or manage more than 1.2 billion
prescriptions per year and will operate approximately 6,800 drugstores
in 41 states and the District of Columbia.
The acquisition will be effected through a tender offer to be launched
shortly by a subsidiary of CVS Caremark for all outstanding Longs
shares. The tender offer will be subject to, among other things, the
condition that at least two-thirds of the outstanding Longs shares are
tendered.
CVS Caremark plans to finance the acquisition with a $1.5 billion bridge
loan facility, together with existing cash and liquidity, which will
provide CVS Caremark with funding sufficient to satisfy its obligations
for the acquisition. The transaction is subject to review under the
Hart-Scott-Rodino Act and has other customary closing conditions. It is
expected to be completed in the fourth quarter of 2008.
Lehman Brothers and Deutsche Bank served as financial advisors to CVS
Caremark on this transaction and provided the bridge loan commitment.
Davis Polk & Wardwell and Mintz Levin Cohn Ferris Glovsky and Popeo P.C.
served as legal advisors to CVS Caremark. J.P. Morgan Securities Inc.
served as financial advisor to Longs and Wachtell, Lipton, Rosen & Katz
served as its legal advisor.
CVS Caremark and Longs will hold a conference call today for the
investment community at 5:30 pm ET to discuss the transaction. The
dial-in number for the call is 1-800-638-4817 or, for international
callers, 617-614-3943. The pass code is 20777324. The call will be
simulcast on both companies’ websites for all
interested parties. To access the webcast, please visit the Investor
Relations portion of each company’s website
at www.cvs.com or www.longs.com.
A replay of the call will be available for 7 days starting at 8:30 pm ET
on August 12 through midnight on August 19. The replay number for the
call is 1-888-286-8010 or, for international callers, 617-801-6888. The
pass code is 52462127. The webcast will be archived for a one month
period following the call.
About CVS Caremark
With annual revenue of approximately $85 billion, CVS Caremark is the
largest provider of prescriptions in the nation. The Company fills or
manages more than 1 billion prescriptions annually. Through its
unmatched breadth of service offerings, CVS Caremark is transforming the
delivery of healthcare services in the U.S. The Company is uniquely
positioned to effectively manage costs and improve healthcare outcomes
through its more than 6,300 CVS/pharmacy stores; its pharmacy benefit
management, mail order and specialty pharmacy division, Caremark
Pharmacy Services; its retail-based health clinic subsidiary,
MinuteClinic; and its online pharmacy, CVS.com. General information
about CVS Caremark is available through the Investor Relations portion
of the Company's website, at http://investor.CVS.com,
as well as through the press room portion of the Company's website, at www.cvs.com/pressroom.
About Longs Drug Stores
Headquartered in Walnut Creek, California, Longs Drug Stores Corporation
(NYSE: LDG) is one of the most recognized retail drug store chains on
the West Coast and in Hawaii. The Company operates 521 retail pharmacies
and offers a wide assortment of merchandise focusing on health,
wellness, beauty and convenience. Longs also provides pharmacy benefit
management services and Medicare beneficiary prescription drug plans
through its wholly-owned subsidiary, RxAmerica, LLC. Additional
information about Longs and its services is available at http://www.longs.com
and more information about RxAmerica is available at http://www.rxamerica.com.
Forward-looking statement
This announcement contains certain forward-looking statements. These
forward-looking statements may be identified by words such as ‘believes’,
‘expects’, ‘anticipates’,
‘projects’, ‘intends’,
‘should’, ‘seeks’,
‘estimates’, ‘future’
or similar expressions or by discussion of, among other things,
strategy, goals, plans or intentions. Various factors may cause actual
results to differ materially in the future from those reflected in
forward-looking statements contained in this announcement, among others:
(1) macroeconomic condition and general industry conditions such as the
competitive environment for retail pharmacy and pharmacy benefit
management companies; (2) regulatory and litigation matters and risks;
(3) legislative developments; (4) changes in tax and other laws and the
effect of changes in general economic conditions; (5) the risk that a
condition to closing of the transaction may not be satisfied; (6) the
risk that a regulatory approval that may be required for the transaction
is not obtained or is obtained subject to conditions that are not
anticipated; and (7) other risks to consummation of the transaction,
including the risk that the transaction will not be consummated within
the expected time period.
Additional information and where to find it
The tender offer described in this announcement has not yet commenced.
This announcement is for informational purposes only and does not
constitute an offer to purchase or a solicitation of an offer to sell
Longs’ common stock. Investors and
stockholders are urged to read both the tender offer statement and the
solicitation/recommendation statement regarding the tender offer when
they become available because they will contain important information.
The tender offer statement will be filed by CVS Caremark with the United
States Securities and Exchange Commission (the "SEC") and the
solicitation/recommendation will be filed by Longs with the SEC.
Investors and stockholders can obtain a free copy of these materials
(when available) and other documents filed by CVS Caremark or Longs with
the SEC at the website maintained by the SEC at www.sec.gov.
The tender offer statement and related materials may also be obtained
for free by contacting Nancy Christal at (914) 722-4704. The
solicitation/recommendation statement and related materials may also be
obtained for free by contacting (925) 979-3979.
For CVS Caremark:
Investors:
Nancy Christal, 914-722-4704
Senior
Vice President, Investor Relations
or
Media:
Eileen
Howard Dunn, 401-770-4561
Senior Vice President, Corporate
Communications &
Community Relations
or
For Longs
Drug Stores:
Kekst and Company
Andrea Calise/Melissa Sheer,
212-521-4845 or 212-521-4839
