Walgreen withdraws its bid for Longs Drug, paving way for CVS

Drugstore chain Walgreen Co. has withdrawn its $2.8-billion bid to acquire Longs Drug Stores, apparently helping to ease the path for Longs’ $2.7-billion acquisition by CVS Caremark Corp.

Longs had already accepted CVS Caremark’s lower bid of $71.50 a share, a deal approved by antitrust regulators.

Walgreen Chief Executive Jeffrey Rein sent a letter to Longs’ board of directors informing it of Walgreen’s decision to withdraw its bid. He cited what he called the Longs board’s refusal to “engage in a constructive dialogue” as well as the broad financial meltdown as reasons for the withdrawal.

Some had questioned whether Walgreen would face antitrust issues because of overlap between its West Coast stores and Longs’. Longs said Sept. 26 that the Federal Trade Commission was investigating whether a Walgreen acquisition would reduce competition among retail pharmacies in parts of California, Nevada and Hawaii, where Longs has most of its stores.

Some Longs shareholders have criticized the CVS deal, saying it might undervalue Longs’ real estate.

Major shareholder Advisory Research has not decided whether it will tender its shares in favor of the CVS bid but has questioned the deal.

Another major shareholder, Pershing Square Capital Research, has said it is against the CVS deal. The two firms combined own about 18% of Longs shares, and the deal requires approval from shareholders owning two-thirds of Longs stock.

Longs, based in Walnut Creek, Calif., has more than 500 stores, mostly in California, but also in Hawaii, Nevada and Arizona. The company also owns Rx America, a prescription benefits management program with more than 8 million members.

Walgreen shares climbed 7 cents to $26.25 in extended trading after the announcement, while Longs shares fell $2.48 to $69.20. CVS was unchanged after hours. It rose 71 cents to $29.84 in the regular session.