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CVS to buy Longs Drug Stores: Existing stores would stay open under new name
(Record, The (Stockton, CA) (KRT) Via Acquire Media NewsEdge) Aug. 13--Longs Drug Stores Corp., the Walnut Creek-based pharmacy chain that includes nine retail locations in San Joaquin County, has agreed to be acquired by the nation's largest prescription provider, CVS Caremark Corp.
In announcing the $2.9 billion deal Tuesday, CVS officials indicated they would retain most of the 521 Longs stores in California, Hawaii, Nevada and Arizona. CVS wants to build its West Coast presence beyond its Southern California and Las Vegas stores.
"There's an overlap market in some of the L.A. area, but we don't have any stores that are next to each other, so there is very little if any overlap," Tom Ryan, CVS chairman and chief executive, said during a conference call with investment analysts.
Longs' existing distribution centers in California and Hawaii would be added to the existing CVS network.
No decisions have been made regarding the disposition of Longs' corporate offices in Walnut Creek nor the continued employment of workers there, said Mike deAngelis, a CVS spokesman at the company's base in Woonsocket, R.I.
The two brothers who founded Longs Drugs and the foundations they established have long been supportive of the pharmacy program at University of the Pacific. Its Thomas J. Long School of Pharmacy and Health Sciences is named for one of them.
Phillip R. Oppenheimer, pharmacy school dean, applauded the acquisition Tuesday.
"CVS Caremark is also well-known to us and is a respected, national leader in pharmacy," he said in an e-mailed statement. "I believe this will be a positive development in patient care, as prescription drugs continue to be a central part of our health care, and patients need more help using them properly. Each company brings a lot of professional experience to the table, and their strengths could be synergistic in the development of new programs and services," he wrote.
Nancy DeGuire, assistant dean at the Long School and a former Longs employee, said the acquisition by CVS has long been anticipated by Longs workers.
"I'm a little melancholy," she said of the combination, adding that many Longs customers must be wondering, "Oh, now what's going to happen to our neighborhood Longs store?"
From a business point of view, however, she said the acquisition makes great sense, and the additional leverage a 6,800-store chain will have with suppliers should bring customers better prices.
"It'll also be really interesting to see how they transition with their customer service," DeGuire said. "One of the hallmarks of Longs Drug has always been customer service. Hopefully, CVS will be able to step up and really offer that customer service."
In responding to analysts' questions, Ryan noted that mergers and acquisitions always carry issues of merging company cultures.
"Longs has a good culture built around customer service and customer satisfaction," he said, promising that CVS would try to meet its customers' expectations.
CVS, which expects to close the deal by the end of the year, plans to spend about $300 million in remodeling the Longs stores and will change the name of the West Coast outlets to CVS. That transition should mostly be completed by the end of 2009.
The Longs name will be retained in Hawaii, however, where it is an especially strong brand.
"It's a smart move in terms of market share for them to keep that name in Hawaii," DeGuire said.
The CVS acquisition involves an offer of $71.50 per share in cash, subject to regulatory approval and the acceptance by holders of at least two-thirds of outstanding shares of Longs stock, which closed at $54.04 on Tuesday, before the announcement.
Ryan noted that Longs owns about 200 of its store locations as well as three distribution centers and three office buildings. The store real estate alone is valued at more than $1 billion.
CVS plans to sell and lease back the stores and distribution centers over time, cashing in on the land value. Disposition of the office property has not been decided.
Ryan also said 10 percent to 15 percent of the stores might be relocated, but he said CVS is in no rush to do so.
Contact reporter Reed Fujii at (209) 546-8253 or rfujii@recordnet.com.
To see more of The Record, or to subscribe to the newspaper, go to http://www.recordnet.com.
Copyright (c) 2008, The Record, Stockton, Calif.
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