CVS & Longs Drugs - Accounting Reporting

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CVS & Longs Drugs - Accounting Reporting

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

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