Walgreen may launch hostile offer for Longs

In a letter to Longs's board, Walgreen said it would prefer to forge a negotiated deal, but it would take its $2.7 billion offer directly to Longs' shareholders if necessary.

Longs, which plans to be acquired by CVS Caremark Corp for $2.57 billion, has previously rebuffed Walgreen's overtures.

Walgreen did not set a deadline, but said it aimed to meet with Longs and its advisers as soon as possible.

Longs has said a deal with Walgreen would raise potential antitrust risks and take longer to close than the agreed upon deal with CVS, which already has regulatory approval.

Longs declined to comment. CVS could not be immediately reached for comment on Monday.

Walgreen said Longs has exaggerated the potential antitrust risk, adding that a combined Walgreen-Longs would have less than 35 percent of the retail pharmacies in almost every metropolitan area where the two companies operate.

In markets where they surpass that less, competition from mail-order companies, health plan pharmacies and expansion by new competitors "should ensure that those areas remain highly competitive," Walgreen said.

To ease concerns about potential divestiture, Walgreen said it partnered with two real estate companies, Klaff Realty and Lubert-Adler, that have agreed to acquire Longs or Walgreens assets that may be required to be divested in order to gain regulatory approval. The agreement is subject to due diligence.

Klaff and Lubert-Adler have experience buying and operating retail locations and over the last several years have co-invested in deals such as the Albertsons privatization, and the purchase of Shopko and Rex Stores, Walgreen said.

Walgreen also said it believes it can get financing for its $75 per share offer, which it believes is superior to the $71.50 per share proposal from CVS.

Shares of Longs closed at $74.51, down 49 cents, on the New York Stock Exchange.

(Reporting by Jessica Hall, editing by Leslie Gevirtz)