CVS
CAREMARK CORPORATION TO ACQUIRE LONGS DRUG STORES CORPORATION
—Provides
Outstanding Store Network in Highly Attractive Central and Northern California
and Hawaiian Markets—
—Broadens
CVS Caremark’s Geographic Footprint Facilitating Roll-Out
of
New Proactive Pharmacy Care Offerings—
—Expands
CVS Caremark’s Position as the #1 Provider of Prescriptions
in
the U.S.—
Woonsocket, RI and
Walnut Creek, California, August 12, 2008 – CVS Caremark Corporation (NYSE: CVS)
and Longs Drug Stores Corporation (NYSE: LDG) today announced that they have
entered into a definitive agreement under which CVS Caremark will acquire Longs
for $71.50 per share in cash for a total purchase price of $2.9 billion
including the assumption of net debt. Through this acquisition, CVS
Caremark will acquire Longs’ 521 retail drugstores in California, Hawaii, Nevada
and Arizona as well as its Rx America subsidiary, which offers prescription
benefits management ("PBM") services to over 8 million members and prescription
drug plan benefits to approximately 450,000 Medicare beneficiaries.
The
addition of Longs’ valuable store locations in Central and Northern California,
Hawaii, and Nevada will provide CVS Caremark with substantial market positions
in these highly attractive, fast growing markets. Further, the
acquisition complements CVS Caremark's substantial presence in Southern
California and provides a foundation for significant future growth throughout
the nation's largest state. The transaction also offers CVS Caremark
immediate market leadership in the highly attractive Hawaiian market, where it
currently does not have a presence, as well as high-quality locations in Nevada
and Arizona.
Significantly, Longs
owns the real estate associated with approximately 200 store locations, three
distribution centers and three office facilities. CVS Caremark has
conservatively valued the store locations alone at more than $1
billion. These stores are located in markets where commercial real
estate values are among the highest in the country and prime locations are
especially difficult to acquire. CVS Caremark intends to unlock the
intrinsic value of these locations, as well as the distribution centers and
office facilities, by monetizing a substantial portion of these assets over
time.
With an enhanced
national reach, CVS Caremark will be in a stronger position as it rolls out its
new suite of offerings under the Proactive Pharmacy Care model, taking advantage
of its retail and PBM services.
Tom
Ryan, Chairman, President and CEO of CVS Caremark, commented, “This transaction
provides tremendous benefits to CVS Caremark by accelerating our expansion in
very attractive drugstore markets and strengthening our geographic
reach. In fact, Longs has a significant presence in ten non-CVS
markets that are among the top 100 drugstore markets in the
country. More than 490 of the stores we are acquiring are located in
the Central and Northern California and Hawaiian markets, where Longs is a
leading player. Longs’ store network in these regions is excellent
and is one that would take a decade or more for us to replicate through organic
growth.
“With this
acquisition, we will increase accessibility to our pharmacies for consumers
and put us in an even better position to grow our new Proactive Pharmacy Care
offerings with our PBM clients. We are very excited about the
potential offered by this combination and the opportunity to build on our strong
track record of acquiring and successfully integrating PBMs and retail drugstore
chains, and we expect this integration to be seamless.
“Over the years, I
have been very impressed with the strong customer loyalty Longs’ employees have
earned throughout the West Coast and Hawaii, as well as the high quality of
Longs’ stores in these markets. We look forward to completing the
transaction and welcoming the talented Longs associates to our company,” Mr.
Ryan concluded.
Warren F. Bryant,
Chairman, President and Chief Executive Officer of Longs, stated, “The
transaction represents an excellent opportunity for Longs to deliver significant
and certain value to its shareholders while positioning its stores to thrive in
the future for the benefit of its employees and customers.
“Over the course of
the last five years, we have transformed Longs into a stronger, more productive,
more profitable company. Given the changing industry landscape, we believe this
combination is the logical next step for Longs. CVS Caremark has a strong record
of successfully integrating drug store chains and pharmacy benefit services into
its portfolio and working with employees to strengthen the performance, format
and offerings of stores. We believe this will present excellent opportunities
for our employees and ensure that our customers continue to receive excellent
pharmacy care and high quality products.”
Longs generates
annual revenues in excess of $5 billion, consistently strong operating cash
flow, and reported EBITDA in the last 12 months of approximately $276
million. Assuming completion of the transaction in the fourth quarter
of 2008, the acquisition is expected to be dilutive to earnings per share in the
first year, and accretive to EPS beginning in 2010. CVS Caremark
expects to achieve significant cost synergies of approximately $100 million in
2009 and approximately $140-$150 million in 2010, resulting from purchasing
efficiencies and a reduction of SG&A expense.
The
combination will expand CVS Caremark’s position as the #1 provider of
prescriptions in the U.S. Following the acquisition, CVS Caremark
will fill or manage more than 1.2 billion prescriptions per year and will
operate approximately 6,800 drugstores in 41 states and the District of
Columbia.
The
acquisition will be effected through a tender offer to be launched shortly by a
subsidiary of CVS Caremark for all outstanding Longs shares. The
tender offer will be subject to, among other things, the condition that at least
two-thirds of the outstanding Longs shares are tendered.
CVS
Caremark plans to finance the acquisition with a $1.5 billion bridge loan
facility, together with existing cash and liquidity, which will provide CVS
Caremark with funding sufficient to satisfy its obligations for the
acquisition. The transaction is subject to review under the
Hart-Scott-Rodino Act and has other customary closing conditions. It
is expected to be completed in the fourth quarter of 2008.
Lehman Brothers and
Deutsche Bank served as financial advisors to CVS Caremark on this transaction
and provided the bridge loan commitment. Davis Polk & Wardwell
and Mintz Levin Cohn Ferris Glovsky and Popeo P.C. served as legal advisors to
CVS Caremark. J.P.
Morgan Securities Inc. served as financial advisor to Longs and Wachtell,
Lipton, Rosen & Katz served as its legal advisor.
CVS
Caremark and Longs will hold a conference call today for the investment
community at 5:30 pm ET to discuss the transaction. The dial-in
number for the call is 1-800-638-4817 or, for international callers,
617-614-3943. The pass code is 20777324. The call will be
simulcast on both companies’ websites for all interested parties. To
access the webcast, please visit the Investor Relations portion of each
company’s website at www.cvs.com
or www.longs.com. A replay of the call will be available for 7 days
starting at 8:00 pm ET on August 12 through midnight on August
19. The replay number for the call is 1-888-286-8010 or, for
international callers, 617-801-6888. The pass code is
52462127. The webcast will be archived for a one month period
following the call.
About
CVS Caremark
With annual revenue
of approximately $85 billion, CVS Caremark is the largest provider of
prescriptions in the nation. The Company fills or manages more than 1 billion
prescriptions annually. Through its unmatched breadth of service offerings, CVS
Caremark is transforming the delivery of healthcare services in the U.S. The
Company is uniquely positioned to effectively manage costs and improve
healthcare outcomes through its more than 6,300 CVS/pharmacy stores; its
pharmacy benefit management, mail order and specialty pharmacy division,
Caremark Pharmacy Services; its retail-based health clinic subsidiary,
MinuteClinic; and its online pharmacy, CVS.com. General information about
CVS
Caremark is
available through the Investor Relations portion of the Company's website, at
http://investor.CVS.com, as well as through the press room portion of the
Company's website, at www.cvs.com/pressroom.
About
Longs Drug Stores
Headquartered in
Walnut Creek, California, Longs Drug Stores Corporation (NYSE: LDG) is one of
the most recognized retail drug store chains on the West Coast and in Hawaii.
The Company operates 521 retail pharmacies and offers a wide assortment of
merchandise focusing on health, wellness, beauty and convenience. Longs also
provides pharmacy benefit management services and Medicare beneficiary
prescription drug plans through its wholly-owned subsidiary, RxAmerica, LLC.
Additional information about Longs and its services is available at
http://www.longs.com and more information about RxAmerica is available at
http://www.rxamerica.com.
Forward-looking
statement
This announcement
contains certain forward-looking statements. These forward-looking statements
may be identified by words such as ‘believes’, ‘expects’, ‘anticipates’,
‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘estimates’, ‘future’ or similar
expressions or by discussion of, among other things, strategy, goals, plans or
intentions. Various factors may cause actual results to differ materially in the
future from those reflected in forward-looking statements contained in this
announcement, among others: (1) macroeconomic condition and general
industry conditions such as the competitive environment for retail pharmacy and
pharmacy benefit management companies; (2) regulatory and litigation matters and
risks; (3) legislative developments; (4) changes in tax and other laws and the
effect of changes in general economic conditions; (5) the risk that a condition
to closing of the transaction may not be satisfied; (6) the risk that a
regulatory approval that may be required for the transaction is not obtained or
is obtained subject to conditions that are not anticipated; and (7) other risks
to consummation of the transaction, including the risk that the transaction will
not be consummated within the expected time period.
Additional
information and where to find it
The
tender offer described in this announcement has not yet commenced. This
announcement is for informational purposes only and does not constitute an offer
to purchase or a solicitation of an offer to sell Longs’ common stock.
Investors and stockholders are urged to read both the tender offer statement and
the solicitation/recommendation statement regarding the tender offer when they
become available because they will contain important information. The
tender offer statement will be filed by CVS Caremark with the United States
Securities and Exchange Commission (the "SEC") and the
solicitation/recommendation will
be
filed by Longs with the SEC. Investors and stockholders can obtain a free
copy of these materials (when available) and other documents filed by CVS
Caremark or Longs with the SEC at the website maintained by the SEC at
www.sec.gov. The tender offer statement and related materials may
also be obtained for free by contacting Nancy Christal at (914)
722-4704. The solicitation/recommendation statement and related
materials may also be obtained for free by contacting (925)
979-3979.
Nancy Christal,
Senior Vice President, Investor Relations
Eileen Howard Dunn,
Senior Vice President, Corporate Communications & Community
Relations
Andrea
Calise/Melissa Sheer
(212) 521-4845 or
(212) 521-4839
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