Walgreen pulls buyout offer for Longs
SAN FRANCISCO (Reuters) - Walgreen Co (WAG.N) withdrew an unsolicited offer to buy smaller rival Longs Drug Stores Corp LDG.N on Wednesday, citing Longs' unwillingness to enter into talks and a growing financial crisis hitting the U.S. economy.
Shares of Longs fell 4 percent in extended trading.
Walgreen had offered $75 per share for Longs, which had already agreed to a $71.50 per share buyout from CVS Caremark Corp (CVS.N).
Longs had repeatedly rejected the Walgreen bid, saying the overlap of both companies' drug stores in certain U.S. states could raise regulatory problems and delay a deal.
Walgreen said it still believed it had made a compelling proposal but that it pulled the offer in light of Longs' "repeated refusal to accept our invitation to engage in a constructive dialogue ... and the substantial deterioration in the national economic outlook over the past few weeks."
CVS said in a statement it was ready to close its offer for Longs that expires October 15.
"We look forward to completing our merger with Longs," read the statement. "It is fully financed, has cleared all regulatory hurdles and is ready to close."
Messages seeking comment from Longs and its large shareholders Advisory Research Inc and Pershing Square Capital Management were not immediately returned.
Advisory and Pershing Square Capital Management, the activist hedge fund, have both said CVS' offer price is too low, arguing that the value of Longs' real estate far exceeds what CVS was willing to pay for the company.
Richard Clayton, research director of CtW Investment Group, which advises pension funds owning about 500,000 shares of Longs, called the move by Walgreens "disappointing" for shareholders and reiterated an earlier charge that Longs' board failed to respond appropriately to Walgreens' offer.
Clayton said it was unclear whether Longs would be able to tender enough shares for the CVS' offer, and whether other potential buyers would now come forth.
"It's conceivable there are still some others out there who are able and willing to make a deal here, but with the financial meltdown everything is uncertain," he said.
Shares of Longs fell $2.68 to $69.00 after closing at $71.68 on the New York Stock Exchange.
(Reporting by Michele Gershberg and Alexandria Sage, editing by Brad Dorfman, Richard Chang)
