Walgreens (WAG) on Friday evening, offered $3 billion or $75 per share, including the assumption of roughly $200 million in debt, for all the shares of Longs Drugs Stores (LDG). This is an all cash offer.

The offer counters a $71.50 bid that CVS (CVS) made for Longs Drug Stores (LDG) on August 12th of this year.

That deal faced opposition from top Longs (LDG) shareholders, including Advisory Research Inc, which owns 9.2% of Longs and Pershing Square Capital Management, who’ve stated that the CVS (CVS) bid undervalues Longs (LDG) real estate holdings and claiming that they won’t tender their shares to CVS (CVS). Longs (LDG) owns more than 490 stores in California, Hawaii, and Nevada.

Walgreens’ (WAG) bid ups the ante and could possibly lead to an escalated bidding war for Long’s Drug Stores (LDG). The CEO of Walgreen, Jeffrey Rein in a letter to Longs Drug Stores’ (LDG) board of directors, said that the company would prefer to negotiate with the company directly, but was also ready to take the offer directly to the company’s shareholders. It also offered to pay a $115 million termination fee that Longs (LDG) would have to pay to CVS, if the agreement with CVS was terminated.

CVS had stated that it would not raise its offer, but we don’t see them sitting idly by while their major competitor acquires Longs (LDG), which would give the eventual acquirer a very strong presence on the West Coast. Walgreens (WAG) is also proposing to acquire Longs’ (LDG) RxAmerica which offers prescription benefits to 8 million subscribers. That can’t sit well with CVS (CVS), so patient traders and investors can probably assume a higher bid above $75 will probably be coming.

Longs (LDG) shares are rising $2.84 to $74.50 in after hours trading.

Tags: CVS  Walgreens  Longs Drug Stores

CVS Caremark (CVS) announced on Tuesday 08/12/08, that it will be acquiring Longs Drug Stores (LDG). Longs (LDG) has about 490 stores in the western United States and Hawaii. The deal is valued at $71.50 all cash per share, or $2.9 billion, including assumption of Long’s (LDG) debt. For the latest fiscal year, Longs Drug Stores (LDG) generated revenues of $5.2 billion and EBITDA of $276 million.

CVS Caremark (CVS) expects the deal to provide it with outstanding store network in the highly attractive Central and North California markets and Hawaiian markets, as well as expanding CVS’ (CVS) position as the number one provider of prescriptions in the United States.

Upon completion of the deal, CVS Caremark (CVS) also expects to achieve cost synergies of approximately $100 million in 2009 and roughly $140-$150 million in 2010. These will result from purchasing efficiencies and a reduction of corporate expenses.

Longs Drug Stores’ (LDG) shares are soaring in after hours. The stock closed at $54.04, down $1.07, but are trading up $16.16 or 29.9%, to $70.20.

 The deal is expected to close in the fourth quarter of 2008.

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