Longs Drug Stores to Pursue $1 Billion Sale Leaseback of Drug Stores, Distribution Centers and Office Buildings

The Modesto Bee - August 13, 2008

Longs Drug Stores, a regional drugstore chain based in Walnut Creek, is being acquired by industry giant CVS Caremark Corp., based in Woonsocket, R.I.

The $2.9 billion acquisition will make CVS Caremark the largest drugstore chain in California, with 830 stores. The company is the leading provider of prescriptions in the United States, and with the acquisition of the 521 Longs stores, it will operate 6,800 drugstores in 41 states and the District of Columbia.

One of the big attractions to buying Longs, said Tom Ryan, CVS chairman, president and chief executive officer, is gaining a strong market position in Central and Northern California and Hawaii. The two chains have few overlapping stores, according to Ryan. The Central and Northern California markets are difficult to enter because of the lack of available drugstore sites, Ryan said. Expanding into the markets by developing its own stores would have taken CVS about 10 years, he said.

Part of the cost of buying the Longs stores would be raised by selling the store properties that Longs owns, along with three distribution centers and three office buildings. The properties would be leased back to CVS, Ryan said. He estimated the value of the Longs properties at $1 billion.

The sale is subject to Longs shareholder approval and federal review. It is expected to be completed during the fourth quarter of this year. Sphere: Related Content