CVS Caremark agreed to acquire its rival Longs Drugs Stores for a total purchase price of $2.9 billion, including debt, and shares of Longs soared almost 30 percent to $70 in extended trade.
CVS Caremark will pay $71.50 per share for Longs to acquire some 521 Longs stores in California, Nevada, Arizona and Hawaii, as well as its Rx America subsidiary, a prescription benefits management services company.
The deal was expected to crimp earnings per share at CVS Caremark in its first year, but add to earnings beginning in 2010, the companies said.
CVS Caremark is expected to gain cost savings of approximately $100 million in 2009 and approximately $140 million to $150 million in 2010 from purchasing savings and lower selling, general and administrative costs.
"This transaction provides tremendous benefits to CVS Caremark by accelerating our expansion in very attractive drugstore markets and strengthening our geographic reach," the company's chairman and chief executive, Thomas Ryan, said in a statement.
CVS shares were about 4 percent lower in late trading. Shares of both pharmacy chains were briefly halted earlier.