CVS & Longs Drugs - Accounting Reporting
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Transcript of CVS & Longs Drugs - Accounting Reporting
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Financial Accounting
Case Presentation
Presented by:
Alexis Kushner
Christopher Serio
Howsen Wang
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CVS Caremark & Longs Drugs
6,300 locations nationwide.
Ranked 24th on Fortune 500 List.
Increased net revenues, gross profits, and earnings from continuing operations in quarter ending 9/27/08.
521 locations throughout west coast and Hawaii.
70-Year History, Opened First Store in Oakland in 1938.
Fiscal 2008 – Closed all 23 stores located in Washington, Oregon, and Colorado.
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Real Estate Contested in Longs-CVS Deal
CVS offers Longs $71.50 per share on August 12th.
CVS values Longs property at $1 billion
Total acquisition offer = $2.9 billion.
Longs shareholders skeptical that property is appropriately valued.
They doubt CVS is offering full market value.
Longs admits that no third-party appraised value of company’s owned real estate, ground leases, or leaseholds.
Shareholders file lawsuits and go to SEC demanding Longs supply valuation information on real estate.
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September Developments 4th – Longs refused to give shareholders
specific real estate asset values. Shareholders sue.
11th – Longs agrees to settle shareholders lawsuit and will provide information in the future.
15th – Walgreens offers Longs a surprise bid of $75/share.
18th – Longs turns down the offer from Walgreens.
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October Developments 9th – Walgreens gives up on pursuing
Longs.
17th –Primary shareholders of Longs accept original CVS offer which was made in August.
Coincidentally, CEO of Walgreens resigns.
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Did Longs Violate Shareholder Obligations?
GAAP: Market Valuation of Assets Does not permit firms to write up the book value
when market values increase.
SEC: Investigated the case and found no fraudulent
activity. Case was dismissed.
Shareholder lawsuit: Longs’ fiduciary responsibility is to act in the best interest of shareholders. This did not happen.
One of the lawsuits was regarding a golden parachute for Longs CEO and receiving Caremark Corp board member benefits.
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Resolution Longs agrees to more disclosure of
financial records and the CVS offer in order to settle the lawsuit and appease shareholders.
CVS acquires Longs for $2.9 billion.
Perhaps, the shareholder should have done their legal research.
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Questions?