S&P rating of CVS unchanged in wake of Walgreens offer

NEW YORK Standard & Poor’s Ratings Services has stated that Walgreens’ competing offer for Longs Drug Stores has no effect on its CVS Caremark ratings.

As reported by Drug Store News, Walgreens has stepped forward with an unsolicited bid to buy Longs Drug Stores Corp. for nearly $3 billion in cash and debt assumption. The bid—announced late Friday evening—scrambles a takeover agreement Longs had already approved with CVS.

Longs agreed Aug. 12 to a $2.61 billion purchase offer from CVS. Walgreens’ bid amounts to $75 per share in cash for Longs, which the company said “represents a $3.50 per share premium over the cash purchase price to be paid to Longs shareholders under the proposed acquisition by CVS/Caremark.”

CVS has extended the expiration for its tender offer to purchase Longs to Oct. 15, and the purchase price remains at $2.9 billion, including the assumption of debt.

“Although it is uncertain whether CVS will make a revised offer for Longs, an upsized offer funded with incremental debt that results in total debt to EBITDA increasing to pro forma debt leverage of over 3.4x from 3.2x currently could result in an outlook revision to negative,” stated S&P. “However, this would require a significant amount of additional debt and we do not view this as likely.”