CtW Investment at odds with Longs Drug's refusal to negotiate with Walgreen

By Lisa Kerner

Charlotte, N.C., Sept. 29 - Longs Drug Stores Corp. shareholder CtW Investment Group is questioning a decision by the company not to negotiate with Walgreen Co.

In a Sept. 29 letter to the chair of Longs' governance committee, Dr. Mary S. Metz, CtW said it is "perplexed" by the board's "repeated refusal to recognize that there are potential acquirers, including but not limited to Walgreen, willing to offer shareholders a higher price than $71.50 per share."

Longs' board of directors said previously that Walgreen is not willing to accept inherent regulatory risks in a potential transaction and is also not willing to compensate Longs stockholders for delays in closing a transaction.

According to CtW's letter, the board failed to provide evidence to support its claims that a merger of Longs and Walgreen faces a possible lengthy regulatory review process that could delay closing by as much as one year.

CtW believes the length of the likely review of the process as well as the cost to Longs shareholders "appear to be significantly exaggerated."

The investor also provided Longs with a report prepared by antitrust counsel from the firm Doyle, Barlow, and Mazard LLC.

The report finds that "a Walgreens/Longs merger should not give rise to significant antitrust concerns, nor require significant divestitures," CtW said in the letter.

Longs announced last week that the Federal Trade Commission asked for information related to Walgreen's unsolicited, non-binding expression of interest to acquire Longs.

The FTC's 25-page request indicates that the acquisition proposal 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.

It was previously reported that Longs' board 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, including debt, 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.

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