FTC initiates investigation into Longs acquisition deal
WALNUT CREEK, Calif. The potential acquisition of Longs Drug Stores has taken yet another turn as the company announced Thursday that the Federal Trade Commission has requested information regarding Walgreens’ unsolicited bid.
The FTC has also requested information regarding several markets that had not been examined in the FTC’s previous review of the proposed Longs-CVS Caremark deal, including Longs’ operations in Hawaii and Longs’ mail order business.
The FTC may add to its request as the investigation progresses. Longs stated that it intends to cooperate in the FTC’s probe.
As previously reported by Drug Store News, Walgreens stepped forward at the 11th hour to upend CVS’ bid for Longs’ 521 retail locations in California, Hawaii, Nevada and Arizona, as well as its PBM services. In its unsolicited, non-binding bid, Walgreens is looking to buy Longs for nearly $3 billion in cash and debt assumption. This represents a $3.50 per share premium over the cash purchase price to be paid to Longs’ shareholders under the proposed acquisition by CVS.
CVS announced in mid-August that it plans to buy Longs for $2.9 billion, including debt. On Sept. 5, the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act expired, satisfying a condition to the closing of CVS’ offer.
As part of CVS’ deal, which is for $71.50 per share in cash, CVS would bolster its already strong PBM business by acquiring Longs’ Rx America subsidiary, which offers prescription benefits management services to more than 8 million members and prescription drug plan benefits to approximately 450,000 Medicare beneficiaries. Management plans to integrate Rx America with Caremark over time.
Responding to the FTC probe, CVS issued a statement Thursday that read: “The opening of an FTC investigation into the anti-competitive aspects of Walgreens’ proposed acquisition of Longs, coupled with such a burdensome request, is highly unusual at this stage since no Hart-Scott-Rodino filing has yet been made. The related information request is as extensive as a Hart-Scott-Rodino ‘Second Request’ and seeks information on 23 different geographic markets. The FTC’s interest in this transaction is not surprising since Walgreens has the second largest number of pharmacy counters in Northern California (Longs has the most) and has announced plans to aggressively enter Hawaii (where Longs is by far the largest and strongest pharmacy operator). CVS believes this development underscores that a Walgreens transaction would entail significant antitrust-related completion risk, and, at a minimum, would entail a regulatory review lasting well into 2009. Significantly, Walgreens previously terminated negotiations with Longs over antitrust concerns and has not offered to assume that risk for Longs shareholders. In addition, Walgreens’ non-binding expression of interest is subject to completion of due diligence and lacks committed financing at a highly uncertain time in the economy and the financial markets.
“In contrast, the CVS Caremark transaction has cleared all regulatory hurdles, is fully financed and is ready to close. We continue to believe that the CVS Caremark offer is a compelling, certain proposition for Longs shareholders.”
Unapproved eye treatments get yanked by FDA
NEW YORK The Food and Drug Administration has told companies to stop selling eye solutions for use during surgery and for treating lesions without regulatory approval, citing dangerous side effects.
The drugs include ophthalmic balanced salt solutions for the eyes and topical drugs containing the papaya-based compound papain.
A number of companies have sold the unapproved eye drugs, including Baxter International and Hospira.
ImClone rejects bid from Bristol-Myers Squib
NEW YORK Biotech ImClone has rejected an acquisition bid by Bristol-Myers Squibb, according to a letter that ImClone chairman Carl Icahn sent to Bristol chairman and chief executive officer James Cornelius Tuesday, calling the bid “absurd.”
On Monday, Bristol announced that it would increase its $60-per-share bid for the biotech to $62 a share, though this still fell short of the $70-per-share offer that ImClone has received from a thus-far undisclosed pharmaceutical company.
“Your letter of yesterday contains inaccuracies which are misleading to our shareholders,” Icahn wrote. “Your statements that there have not been any meaningful discussions concerning your proposal have no basis in fact. … I also told you a large Pharma company had offered $70 subject to due diligence and the diligence will be over on Sunday, September 28, 2008. In light of these facts, your hostile tender of $62, at this time, seems absurd.”
At the end of the letter, Icahn didn’t mince words.
“If you wish to make your attorneys wealthier, I can show you more productive ways to do so,” he wrote. “Or, if you simply want publicity, I can also help you in that regard without your having to make unnecessary expenditures.”