Pershing Square started purchasing common stock and options of Longs Drug Stores Corporation at the end of June 2008 and, by the end of July 2008, accumulated an 8.8% beneficial ownership position and eventually obtained an approximately 25.8% economic stake in the company. On August 12, 2008, Longs Drug announced that it had entered into an agreement with CVS Caremark Corporation at a price of $71.50 per share. Pershing Square believed that Longs Drug had engaged in a suboptimal sale process and sought to convince the board of directors of Longs Drug to open the process to additional bidders. Pershing Square also hired Blackstone as its own financial advisor and sought to attract competing bidders. In particular, Pershing Square and Blackstone approached Walgreen’s Corporation.
As a result of Pershing Square’s efforts, in September 2008, Walgreen’s offered a competing bid of $75 per share, which was rebuffed by Longs Drug. Walgreen’s later withdrew its bid in light of the repeated refusal of Longs Drug to engage in discussions with Walgreen’s and the deteriorating economic conditions. Longs Drug consummated the transaction with CVS Caremark in October 2008.
Pershing Square believes that its involvement enhanced both the speed and certainty of a sale of Longs Drug, hence contributed to the value creation for shareholders of Longs Drug.
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