Status Report: Longs Drug Stores - CVS Caremark

Pershing Square Capital Management sent a letter to Longs Drug Stores (LDG) Thursday (9/11) expressing its continued opposition to its merger with CVS Caremark (CVS). Key passages for the letter are as follows:

For the reasons outlined in this letter, we do not currently support the Transaction and consequently do not intend to tender our 3.1 million shares into the CVS offer. Based on public disclosures to date, we believe that the process that led to the Transaction’s announcement was seriously flawed. On the other hand, with our efforts and the assistance of our financial advisor, The Blackstone Group, we remain hopeful that any past defects in the process can be remedied even at this late date (and despite what we view to be overly restrictive deal lock-up clauses).

While we are critical of the process, we take comfort from the fact that the Company and its advisors negotiated a contractual provision requiring CVS to hold the offer open for one full year — until August 12, 2009. Furthermore, the Transaction permits the Company to pay its normal $0.14 dividend, so as shareholders we get paid dividends while we wait. As a result, we view ourselves and other shareholders as having a one-year “put” to CVS at the transaction price of $71.50. We believe that the value of Longs to CVS and other interested parties substantially exceeds the announced deal price. Given that approximately 18.6 million shares, or 52% of the basic outstanding shares of common stock, have traded at or above the $71.50 offer price since the Transaction’s announcement, the market appears to agree that a higher deal value should be achieved.

Consequently, we do not believe that the tender offer’s minimum tender condition of 66 2/3% of the outstanding shares will be satisfied by September 15, 2009, the earliest date that CVS would otherwise be entitled to take up and pay for tendered shares.

As of this update, the other two major LDG shareholders -- CTW and Advisory Research -- have not publicly disclosed their latest positions. However, it is fully anticipated that these two, along with other shareholders, possess nearly identical opinions as Pershing at this time.

In other words, this publication agrees with Pershing's assessment that the minimum tender conditions will not be met by the current September 15, 2008 expiration date.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.

Comments

[PISSED OFF ...:]

OK as a Long's employee, Pershing NEEDS to BACK OFF! They do not care what's happens to us the employee's who are busting their tails day in and day out. All that JERK wants is to line his pockets even more than he already has. I am sorry but we have been trading at $49-$50 a share for over a year and a weeks before we get the CVS deal Pershing suddenly buys 1.4 million in shares? That smells of an insider leak and I hope Pershing and all it's croanies get investigated for it. Quit trying to line your pockets even more and leave us the hard working employee's of Longs Drugs alone.

2008 Sep 14 08:41 PM

[Brighteyes:]

I am sorry, but that is what banks do and the Government is first in line to help them screw shareholders. Check out how Bear Sterns shareholders made out while the banks were busy pillaging for themselves. While you are at it, check out how much the common shareholders for Freddymac and Fannymac got for their investment while taxpayers bore the brunt of the expense. Finally Lehman Brothers is the victim and it is a bankers joke to see all those employees out of work. I have had bad experiences with Pershing in the past so I'm not surprised at your plight.

DISCLOSURE: I Am Long CVS

2008 Sep 15 03:15 PM

[what NOW!:]

I agree 100% with Pissed off Longs employee, as a fellow "P"d off Longs employee, this whole CVS thing came up so suddenly to those of us on the front lines everyday, blood, sweat and years on our belts, I was ready to do the same for CVS and then this "group" with no intrest in our company (other than to make a quick buck) or intrest in the people who have worked so hard to make it what it is today, throws their greedy hand in the mix and now Walgreen's,too... How many employees would we be loosing if Walgreens takes over.. We are not Starbucks there can't be a Long's on every corner... so then what... We are out of luck and Pershing gets rich...ER!!!


On Sep 14 08:41 PM PISSED OFF LONGS EMPLOYEE wrote:

> OK as a Long's employee, Pershing NEEDS to BACK OFF! They do not
> care what's happens to us the employee's who are busting their tails
> day in and day out. All that JERK wants is to line his pockets even
> more than he already has. I am sorry but we have been trading at
> $49-$50 a share for over a year and a weeks before we get the CVS
> deal Pershing suddenly buys 1.4 million in shares? That smells of
> an insider leak and I hope Pershing and all it's croanies get investigated
> for it. Quit trying to line your pockets even more and leave us the
> hard working employee's of Longs Drugs alone.

2008 Sep 15 09:43 PM

[Ldg unhappy:]

As a pissed off employee who will be losing a great job maybe someone should look at Warren Bryant and how him and the board has screwed us. They walk away with millions and we get unemployment with a crappy severance package. At a time when employment is not available in the bay area why was it so important to make the deal now. Possibly because Mr.Bryants contract is over and he needed the extra what 36million ?



On Sep 15 09:43 PM what NOW! wrote:

> I agree 100% with Pissed off Longs employee, as a fellow "P"d off
> Longs employee, this whole CVS thing came up so suddenly to those
> of us on the front lines everyday, blood, sweat and years on our
> belts, I was ready to do the same for CVS and then this "group" with
> no intrest in our company (other than to make a quick buck) or intrest
> in the people who have worked so hard to make it what it is today,
> throws their greedy hand in the mix and now Walgreen's,too... How
> many employees would we be loosing if Walgreens takes over.. We are
> not Starbucks there can't be a Long's on every corner... so then
> what... We are out of luck and Pershing gets rich...ER!!!
>
>
> On Sep 14 08:41 PM PISSED OFF LONGS EMPLOYEE wrote:
>
> > OK as a Long's employee, Pershing NEEDS to BACK OFF! They do not

>
> > care what's happens to us the employee's who are busting their
> tails
> > day in and day out. All that JERK wants is to line his pockets
> even
> > more than he already has. I am sorry but we have been trading at

>
> > $49-$50 a share for over a year and a weeks before we get the CVS

>
> > deal Pershing suddenly buys 1.4 million in shares? That smells
> of
> > an insider leak and I hope Pershing and all it's croanies get investigated

>
> > for it. Quit trying to line your pockets even more and leave us
> the

2008 Sep 18 06:59 PM