New York City Walgreen Co. said Wednesday that it had withdrawn its bid to acquire Longs Drug Stores. The move clears the way for CVS Caremark’s $2.8 billion deal to acquire Longs.
Walgreen chief executive Jeffrey Rein sent a letter to Longs’ board in which he cited the board’s unwillingness “to engage in a constructive dialogue” and the nation’s worsening financial crisis as the reasons for the withdrawal.
Longs had repeatedly rejected the Walgreen bid, saying the overlap of both companies' drug stores in certain U.S. states could raise regulatory problems and delay a deal. Longs has already accepted a lower bid by CVS prior to the Walgreens offer. The CVS deal had been approved by antitrust regulators.
However, some Longs shareholders have been critical of the CVS deal, saying it could undervalue the chain’s real estate.
Richard Clayton, research director of CtW Investment Group, which advises pension funds owning about 500,000 shares of Longs, called the move by Walgreens "disappointing" for shareholders and reiterated an earlier charge that Longs' board failed to respond appropriately to Walgreens' offer, according to Reuters.