Advisory Research weighs in on FTC's request for information on Walgreen's offer for Longs Drug

By Lisa Kerner

Charlotte, N.C., Oct. 1 - Longs Drug Stores Corp. investor Advisory Research, Inc. said it is time for the company's board of directors to "step up to the plate" and respond to the Federal Trade Commission's request for information related to Walgreen Co.'s offer for Longs.

"As Longs' largest shareholder with holdings for our clients of approximately 9.2% of Longs' outstanding shares, we expect the board to satisfy its fiduciary duties to its shareowners by adopting a level playing field posture and by fully cooperating with the FTC," Advisory Research said in an Oct. 1 letter to Longs.

It was previously reported that the FTC's 25-page request indicates that the proposed acquisition from Walgreen, a Deerfield, Ill., drugstore operator, "may substantially lessen competition among retail pharmacies" in parts of California, Nevada and Hawaii, it was previously reported.

The FTC also asked for information regarding markets that had not been examined in its previous review of the proposed Longs/CVS Caremark Corp. transaction. Those markets include Longs' operations in Hawaii as well as its mail-order business, a prior Longs news release said.

Longs' board of directors had rejected Walgreen's proposed $75.00-per-share offer and is recommending that its stockholders tender their shares in the offer by CVS Caremark, which agreed to acquire the Walnut Creek, Calif., drugstore chain for $2.9 billion, or $71.50 per share.

CVS Caremark, a Woonsocket, R.I., drugstore chain, extended its tender offer for Longs to midnight ET on Oct. 15 on news of Walgreen's offer.

According to Advisory Research, Longs has two issues with Walgreen's offer: Can a Walgreen/Longs merger be accomplished under the antitrust laws and, if so, how long will it take?

Advisory Research said the FTC is "prepared to make a determination as to whether Walgreens can acquire Longs and on what terms."

The investor reiterated the need for Longs' board to act promptly and satisfy the FTC's request.

"To do otherwise might impair Walgreens' ability to reach an agreement with the FTC and proceed with its superior offer," Advisory Research said in the letter.

"This would deprive Longs shareholders of the ability to take advantage of the clearly higher offer of $75.00 per share from Walgreens in contrast to the CVS lower offer of $71.50 per share," the investor added.

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