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CVS & Longs Drugs - Accounting Reporting
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CVS & Longs Drugs - Accounting Reporting

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MBA

MBA

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Transcript

  • 1. Financial AccountingCase Presentation
    Presented by:
    Alexis Kushner
    Christopher Serio
    Howsen Wang
  • 2. 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.
  • 3. 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.
  • 4. 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.
  • 5. 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.
  • 6. 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.
  • 7. 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.
  • 8. Questions?

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