U.S. drugstore chain CVS Caremark Corp. (CVS) agreed to buy its smaller rival Longs Drug Stores Corp (LDG). That was before Walgreen Co. (WAG) made an offer for Longs recently for $75/share, trumping the accepted CVS offer of $71.50/share. Walgreen also agreed to pay the $115 million termination fee that Longs would incur by accepting the new Walgreen offer. 'Going Long' seems to be on both these company's minds.
Longs operates 521 pharmacies in the western U.S. The move by Walgreen is seen as out of character as they have traditionally chosen to grow organically. The market seems to be anticipating further offers for Longs as the stock is currently trading above the Walgreen bid price of $75. Walgreen is looking to grow by snapping up Longs who runs valuable locations in the south west U.S. and especially the Hawaii market, which WAG had been looking to grow. This could turn out to be an interesting battle in the drug store industry as these two companies fight for market share and growth opportunities. Increasing market share helps keep competitive pressures at bay as incumbent players battle for customers and less traditional players like Wal-Mart (WMT) enter the pharmacy industry.
This article was written by the moneygardener. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
