|Longs Drugs' Rosewood Pavilion store could soon have a name change.
The 70-year-old Walnut Creek-based retail pharmacy announced Tuesday that it's being sold to rival CVS Caremark Corp. for $2.9 billion. Most of Longs' 521 stores in California, Arizona, Hawaii and Nevada will switch names by the end of next year.
In a definitive agreement, CVS Caremark, which is headquartered in Woonsocket, Rhode Island, will acquire Longs for $71.50 per share in cash 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' store locations in Central and Northern California, Hawaii, and Nevada will provide CVS Caremark with substantial market positions. Further, the acquisition complements CVS Caremark's substantial presence in Southern California and provides a foundation for significant future growth throughout California.
Longs owns the real estate associated with approximately 200 store locations, three distribution centers and three office facilities, although it leases its space in the Rosewood Pavilion. CVS Caremark has 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.
"This transaction provides tremendous benefits to CVS Caremark by accelerating our expansion in very attractive drugstore markets and strengthening our geographic reach," said Tom Ryan, chairman, president and CEO of CVS Caremark.
"In fact, Longs has a significant presence in 10 non-CVS markets that are among the top 100 drugstore markets in the country," he added. "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."
The move expands the second-largest drug store chain's presence in the West and eliminates Longs from the pitched battle for business between some of the nation's biggest retailers, including Walgreen Co., Rite Aid Corp. and Wal-Mart Stores Inc.
Longs generates annual revenues in excess of $5 billion. Assuming completion of the transaction in the fourth quarter of 2008, the Longs' Pleasanton store is expected to switch its name to CVS soon after the purchase agreement is completed.
Jeb Bing,Longs Drug,CVS
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