SAN FRANCISCO (Thomson Financial) - CVS Caremark Corp. late Tuesday said it has agreed to buy Longs Drug Stores Corp. for $71.50 a share in a deal valued at $2.9 billion including debt.
The acquisition will dent the company's profit in the first year but should add to earnings from 2010, CVS said. Cost synergies will probably come to around $100 million in 2009 and $140 million to $150 million in 2010.
The deal is expected to close in the fourth quarter.
The Woonsocket, R.I.-based drugstore chain plans to finance the purchase with a $1.5 billion bridge loan and existing cash and liquidity.
CVS said the acquisition will open up markets in Northern California and Hawaii, where Longs is a market leader, that would otherwise take it at least a decade to develop. The deal will deliver some 521 Longs stores to CVS as well as Longs' Rx America unit, which provides prescription benefits management services and Medicare prescription drug plan benefits.
Once the transaction closes, CVS will fill or manage more than 1.2 billion prescriptions a year and will run around 6,800 drugstores in 41 states and the District of Columbia. The company currently fills or manages around 1 billion prescriptions a year.
'This transaction provides tremendous benefits to CVS Caremark by accelerating our expansion in very attractive drugstore markets and strengthening our geographic reach,' CVS Chairman, President and Chief Executive Tom Ryan said in prepared remarks.
Walnut Creek, Calif.-based Longs also owns prime store locations in expensive real estate markets that CVS says it has conservatively valued at around $1 billion. In addition, Longs owns real estate associated with three distribution centers and three office facilities. CVS said it is looking at monetizing 'a substantial portion' of these properties over time.
Shares of CVS closed at $38.05 and fell 6.7% in after-hours trade. Longs' shares closed at $54.04 and soared 30% in late trading. Brigid Gaffikin bg/gm COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.