CVS Caremark Corporation, the national drug store chain based in Woonsocket, Rhode Island, announced its acquisition of Longs Drug Stores Corporation, from Walnut Creek, California. CVS purchased Longs for $2.9 billion, according to an official press release, which will increase its locations in California from 382 in 2007 to 829 after the business transaction is completed.
Longs generates annual revenues in excess of $5 billion. Assuming completion of the transaction in the fourth quarter of 2008, CVS Caremark expects to achieve significant cost synergies of $100 million in 2009 and $140-$150 million in 2010.
“This transaction provides tremendous benefits to CVS Caremark by accelerating our expansion in very attractive drugstore markets and strengthening our geographic reach,” says Tom Ryan, chairman, president and CEO of CVS Caremark. “In fact, Longs has a significant presence in 10 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. ... With this acquisition, we will increase accessibility to our pharmacies for consumers and it puts us in an even better position to grow our new Proactive Pharmacy Care offerings with our prescription benefits management clients.”
In 2006, CVS purchased the Sav-On chain of stores from Albertson’s Inc. A year later, CVS acquired Caremark, expanding its services into the PBM business, which will continue with this year’s acquisition of Longs’ PBM unit, RxAmerica. In total, CVS Caremark will acquire Longs’ more than 500 retail drugstores throughout California, Nevada and Arizona, as well as its Rx America subsidiary. Stores in Hawaii will continue to carry the Longs banner. The deal will give CVS control over 6,800 total drugstores in 41 U.S. states.
There is no word yet on how this acquisition will affect CVS’ direct competitor, Walgreens, which operates more than 6,000 drugstores in every U.S. state, except Alaska. However, Walgreens does plan to open Alaskan drugstores in 2009.