CVS confident of Longs offer; speculation swirls around Lehman; SunOpta plans strategic review

By Aaron Hochman-Zimmerman

New York, Sept. 4 - Investors left Wall Street limping on Thursday as accounts sold off en masse. Still, CVS Caremark Corp. showed some swagger in its step over the offer for Longs Drug Stores Corp., but many felt its offer undervalues Longs.

Elsewhere, investors across the market sectors are following the fate of one of the financial leviathans Lehman Brothers Holding Co.

Lehman's trials have attracted a number of suitors and reports on Thursday said Mitsubishi UFJ Financial Group was part of that pack.

However, without equivocation Tokyo Mitsubishi denied it is in the market for Lehman.

Also in agriculture, Canada's SunOpta Inc. announced it will begin a strategic review to possibly cut loose its mining operation in order to focus on its food production business.

The move surprised few who are familiar with the company.

Meanwhile in the broader market, the Dow Jones Industrial Average was walloped and ended lower by 344.65, or 2.99%, at 11,188.23, while the Nasdaq Composite Index sank 74.69, or 3.20%, to finish at 2,259.04.

The S&P 500 was slammed for 38.15 or 2.99%, to close at 1,236.83.

CVS offer still too short for Longs

At an investor conference on Thursday CVS Caremark's chief executive officer Tom Ryan attempted to reassure Longs' shareholders that CVS has the right formula to create value in Longs' real estate holdings.

Still, "I didn't take much from the conference," an equity analyst said.

At the same conference, Ryan said confidently that if the tender is accepted the deal could close by Oct. 1, however most are expecting a longer fight than that.

Even at a $71.50 per share offer price, many feel the CVS bid undervalues Longs.

CTW which represents Longs shareholders have asked Longs to release information regarding the value of its real estate in order to better determine the worth of CVS' offer.

The offer does represent a 32% premium, but it is unlikely Longs will accept, the analyst said.

The tender offer also expires shortly, but can be extended for up to one year.

"Look what happened to Yahoo!'s stock in a year," the analyst said.

Shares of Longs Drug Stores (NYSE: LDG) added on $0.10, or 0.14%, to close at $71.75.

Shares of CVS Caremark (NYSE: CVS) shed $0.96, or 2.56%, to end the day at $36.49.

SunOpta opts for review

SunOpta announced that it will begin a strategic review of the company as investors watch its stock "trade at a discount to its historical valuation benchmarks," according to chairman of the board Jeremy Kendall, in a press release.

The disappointing share price and the quest for improved shareholder value come "despite record revenue and strong internal growth and operating performance," Kendall said in the release.

The review will cover the company's business plan and growth plans as well as a possible sale of non-core business assets.

Still, the company made no guarantees that the review will lead to any sort of deal.

In addition, the company plans to introduce a shareholder rights plan which is designed to process of developing alternatives to increase shareholder value in the event of an unsolicited offer.

In the release, SunOpta insists that no offers are currently pending and the plan will not be skewed to favor any particular offer.

The effect of the review will "probably" yield a plan to "ultimately sell Opta Minerals," said Canaccord Adams analyst Scott Van Winkle about the Brampton, Ont.-based mining and filtration firm.

SunOpta owns approximately two-thirds of Opta Minerals, Van Winkle said.

The question that remains is what SunOpta will do with the approximately $40 million it will likely receive for the public sale of its mining interests.

Whatever the use of the $40 million, the move was anticipated by investors and is expected to be a positive for the company.

SunOpta has always discusses selling its non-core assets and now seemed to be the best time, Van Winkle said.

This will allow it to focus on its billion-dollar food business, he added.

Shares of SunOpta (Nasdaq: STKL) slid $0.18, or 2.55%, to finish the session at $6.87.

Another joins line to Lehman's door?

After investors began to digest the idea of a bid for a slice of Lehman Brothers by a Korean consortium led by the Korea Development Bank, another Asian offer may have come from across the waters.

The Times of London reported that unnamed sources at Mitsubishi said that Japan's largest lender may be join the crowd which is circling around the limping giant Lehman. The bank denied it was interested.

"If it turns out they are involved, that's lying," a market source said, which can be a dangerous prospect.

"They could say: 'no comment,'" he added, but one of them has to be wrong.

Whether or not Lehman loses limbs "is all going to come down to what the price is," said Paul Martin of Martin Capital Advisors.

"I'd be surprised if Lehman got taken out at much more of a premium from where it is currently [trading]," he said.

What is sure is that "there's opportunity out there right now ... There are a lot of players who have cash," he said, but with most of them "the problem is that they don't want to pay up."

Shares of Lehman Brothers (NYSE: LEH) bled $1.77, or 10.45%, to end at $15.17.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.