CVS to Buy Longs Drug For About $2.6 Billion

CVS Caremark Corp. agreed to buy Longs Drug Stores Corp. for about $2.6 billion, a move that will expand the company's footprint in California, Nevada and Hawaii.

The move is the latest in an acquisition strategy that has catapulted CVS over Walgreen Co. to become the biggest drugstore chain in the country by number of stores, and one of the largest retailers of any kind. The takeover will give CVS, of Woonsocket, R.I., 6,800 drugstores in 41 states.

With its acquisition of Caremark last year, CVS also became a major player in the prescription benefits-management business. One of the factors that attracted CVS to Longs was the West Coast company's pharmacy benefit-services unit, RxAmerica.

The RxAmerica unit posted revenue of $187 million in the first quarter ended May 1, up 67% from $112 million in the same quarter a year earlier. RxAmerica manages prescription benefits for eight million people and offers prescription plans for 450,000 Medicare beneficiaries this plan year, almost double the previous plan year.

CVS will pay $71.50 a share for each Longs share -- a 32% premium to its 4 p.m. closing price of $54.04 on the New York Stock Exchange. The deal was announced after the close of regular trading. Longs had fallen $1.07, or 1.9%, in composite trading Tuesday. CVS fell 49 cents, or 1.3%, to $38.05, also on the Big Board. In after-hours trading, CVS's shares fell 4.4%, to $36.38.

For the fiscal year ended Jan. 31, Longs posted revenue of $5.26 billion and net income of $96.2 million. For the year ended Dec. 29, CVS had net income of $2.64 billion on revenue of $76.33 billion.

The Longs purchase gives CVS a presence in markets where it has been weak, most notably in northern California and Hawaii. The 521 retail locations it will acquire as part of the deal also include stores in Nevada and Arizona.

Also attractive to CVS is Longs' real estate. The company owns 200 of its store locations as well as three office facilities. CVS said it has valued the real-estate holdings at more than $1 billion and indicated it plans to monetize assets over time.

The deal is subject to antitrust review. With the purchase, CVS said it will manage or fill 1.2 billion prescriptions a year. Last year, according to health-care data company IMS Health, about 3.8 billion prescriptions were dispensed in the U.S.

The acquisition will more than double the number of locations the company has in California -- from 382 at the end of last year to 829 after the deal. Just two years ago, CVS barely had a presence in California. That changed when the company bought the Sav-On chain of stores from Albertson's Inc. in 2006.

In a conference call, CVS Chief Executive Thomas Ryan said the Los Angeles area is a top revenue generator for the company. He also said CVS wouldn't follow a cookie-cutter approach to operating its West Coast stores. Although the Longs stores in California will eventually be renamed as CVS stores, he said a West Coast-based merchandising team will make local decisions on stocking the stores.

"We are not going to just go in and put a Boston CVS in San Francisco," he said.

The Hawaii stores acquired by CVS will continue to operate under the Longs name, Mr. Ryan said.

The purchase of Longs, of Walnut Creek, Calif., could put more pressure on Walgreen. Walgreen last month said that it planned to slow its rate of store growth for several years, reversing a strategy of rapid expansion. Walgreen operates 6,356 drugstores in every state but Alaska, where it plans to open stores next year.

CVS said it expected the deal to be completed in the fourth quarter. Including assumed debt, CVS valued the purchase at $2.9 billion.

CVS said it expects to achieve cost savings of $100 million in 2009 and about $140 million to $150 million in 2010. The deal will be financed in part by a $1.5 billion bridge-loan facility.

Kimberly-Clark Names Brickman as Chief Strategy Officer

 

Christan Brickman will start September 1st as chief strategy officer, reporting to Chairman and Chief Executive Officer Thomas J. Falk. In this position, Mr. Brickman will lead the development and monitoring of the company's strategic plans and processes to enhance K-C's enterprise growth initiatives.

 

Mr. Brickman is currently a principal in McKinsey & Company's Dallas office and a leader in the firm's consumer packaged good and operations practices.

LVMH Appoints Renaud Dutreil as Chairman

 

Renaud Dutreil has been appointed chairman of LVMH Inc., based in New York, as of Sept. 1. According to the company, he will represent the group in North America, notably to public authorities and business community.

 

In a statement to the press, LVMH says Mr. Dutreil will ensure the regional coordination of activities focusing on business performance and image coherence. He will also be responsible for the group's common departments in the United States and will bring his expertise to the support functions like finance, legal, property, communication and human resources.

 

Mr. Dutreil has extensive experience in small and medium-sized businesses, commerce, crafts and liberal professions.

J&J Acquires Chinese Cosmetics Company

 

Beijing Dabao Cosmetics Co. Ltd. is a successful brand in China

 

Johnson & Johnson (China) Investment Co., Ltd. today announced that it has acquired Beijing Dabao Cosmetics Co., Ltd. from Beijing Sanlu Factory and the Beijing Dabao Co. Ltd. Staff Shareholding Committee. The acquisition was completed after receipt of all necessary government approvals and procedures. Financial terms of the transaction are not being disclosed.

 

“This transaction is an extension of our commitment to China, and to the continued development of China’s consumer health care sector,” said Jesse Wu, President of Johnson & Johnson (China) Investment Co., Ltd.

 

“Since establishing our first joint venture in China in 1985, the Johnson & Johnson Family of Companies has continuously demonstrated its commitment to improving the health and well-being of Chinese families, and to China as an important market. We are very pleased to add the well-known and respected Dabao brand to our growing portfolio of health care brands in China. We look forward to working with our new colleagues at Dabao to serve even more Chinese families with Dabao’s leading Chinese products.” Other Johnson & Johnson consumer skin care brands in China include Johnson’s Baby, Neutrogena and Clean & Clear.

 

“We are proud to be an Official Partner of the Beijing 2008 Olympic Games and Paralympic Games. We also have launched the Johnson & Johnson Family Health Initiative in China—a comprehensive campaign featuring a number of national health education programs that will help families in China enjoy happier, healthier lives,” Mr Wu added.

 

Dabao personal care brands have met a wide range of needs for Chinese consumers since 1985. Its skincare line includes products well-known in Chinese households, including Sod Milk, Beauty Day Cream, and Sod Protein Milk.

 

”Dabao is a successful brand in the China market, and a brand we respect. We plan to develop the brand further with the help of Dabao’s unsurpassed local market knowledge and our experience in marketing, research and product innovation,” said Mr. Wu.

McCormick & Co. wins conditional approval of Lawry's acquisition

McCormick & Co. Inc. said Wednesday it expects to wrap up its delayed $604 million acquisition of well-known spice maker Lawry's in the next several days.

The Federal Trade Commission approved McCormick's acquisition of Lawry's, a subsidiary of Dutch giant Unilever N.V. (NYSE: UN).

As part of the agreement with the FTC, Sparks-based spice giant McCormick (NYSE: MKC) will sell its Season-All business line to Chicago's Morton International, better known as Morton Salt Group, for $15 million in cash. That deal is also expected to close in the next several days.

The Season-All business has annual sales of around $18 million.

McCormick said in a news release it would provide additional financial details of the Lawry's transaction as well as growth plans for the product line following the completion of the acquisition.

McCormick said in November it could cut costs by using its Hunt Valley manufacturing facilities to produce Lawry's seasonings. Some of those savings will be reinvested to boost sales growth through product innovation and more focused marketing, McCormick said at the time.

In November, McCormick also said it would finance the deal through cash from operations, bank lines of credit and commercial paper borrowings, which companies use for short-term credit needs.

Unilever Sells Laundry Unit
As CEO Hunt Moves Ahead

Consumer-products giant Unilever threw in the towel on its North American laundry-detergent business Monday, agreeing to sell All, Surf, Snuggle and its other detergents to a private-equity firm.

The sale signals the depth of the challenges facing Manvinder Singh Banga, who was named head of personal-care and food products at Unilever earlier this year and is a leading candidate to be the company's next CEO. The maker of such products as Dove skin and hair products, Hellmann's mayonnaise and Ben & Jerry's ice cream decided to sell its North American laundry operations after calculating it had lost too many shoppers to rivals, primarily Procter & Gamble Co. Vestar Capital Partners Inc. agreed to pay $1.075 billion in cash and $375 million in shares in the company that Vestar will form with the brands, to be called Sun Products Corp.

The sale is part of a strategy to turn around Unilever, which also includes increasing sales, launching more new products, and successfully uniting Unilever's traditionally separate food and consumer-products businesses. Mr. Banga, 53 years old, known as Vindi, will get a report card on Thursday, when Unilever reports second-quarter results. The company had a strong first quarter.

Mr. Banga's performance over the next year will be watched closely as the company figures out who will succeed Chief Executive Patrick Cescau, 59 years old. The changeover is likely to occur next year, a person familiar with the situation said.

Mr. Banga, who declined to comment for this article, is one of several potential CEO candidates from diverse backgrounds whose careers at Unilever have been fostered by Mr. Cescau. For years, Unilever was run by two chairmen, one in London and one in Rotterdam. Dutch managers dominated the food division, and the English were largely in control of shampoo, soap and deodorant. Three years ago Mr. Cescau, a Frenchman, established a single executive team, which includes Mr. Banga.

Grupo SOS to Buys Bertolli Olive-Oil Business from Unilver To Expand in U.S.

Spanish food company Grupo SOS SA agreed to buy Unilever's Bertolli olive-oil and vinegar business for €630 million ($998 million) in a move to strengthen its position as the world's leading olive-oil bottler.

Grupo SOS, which owns brands such as Italy's Carapelli and Spain's Carbonell, already controls about 15% of the world's olive-oil output. The acquisition of Bertolli, the world's biggest olive-oil brand, will bring its market share to 20%.

The Spanish company has a market value of €1.76 billion and last year reported sales of €1.41 billion. The Bertolli acquisition, which will add €380 million in annual sales, is part of Grupo SOS's drive to secure a larger share of the coveted U.S. food market amid rising demand for healthier products.

"This transaction is absolutely strategic to Grupo SOS and it reinforces us as world-wide leaders in olive oil," said Chairman Jesus Salazar. "We share our focus on the Mediterranean diet with Unilever, and benefits will accrue to both our groups and to the consumer."

Consumption of olive oil has grown world-wide after being linked to health benefits such as longer life and lower cholesterol. Oil bottlers have also launched premium brands in recent years on rising global demand for international gourmet products.

Anglo-Dutch consumer-products company Unilever said it will keep using the Bertolli brand for other foods, including margarine, pasta sauces and frozen meals. The Bertolli brand had global revenue of about €700 million in 2007, Unilever spokesman Gerbert van Genderen Stort said.

Unilever, which makes Skippy peanut butter, Ben & Jerry's ice cream and Dove soap, will book a profit of €450 million on the olive-oil and vinegar divestment, Mr. van Genderen Stort said. Unilever said in May that it might sell the Bertolli oil and vinegar business, but that it was considering keeping the Bertolli brand for other foods. The sale is part of a continuing divestment plan that includes businesses with combined annual sales of €2 billion.

Like other food companies, Unilever has been hit by rising commodity prices of corn, edible oils and milk. At the same time, it has been re-evaluating its brand portfolio, cutting jobs and costs as well as shedding units as it focuses on innovative and higher-priced products to boost profit.

UBS AG advised Grupo SOS and NM Rothschild & Sons Ltd. advised Unilever on the deal.

P&G Taps New Global Marketing Boss 

One of the most influential executives in the marketing world, Procter & Gamble Co.'s global marketing chief Jim Stengel, is stepping down unexpectedly, a move that could have broad repercussions for Madison Avenue.

P&G's marketing czar since 2001, Mr. Stengel, 53 years old, is leaving to pursue other interests. He will be succeeded in August by Marc Pritchard, 48, a veteran P&G executive who most recently has been president of strategy, productivity and growth.

P&G is the world's biggest advertiser, spending about $8 billion a year world-wide for products that range from Pampers diapers to Tide laundry detergent.

Mr. Pritchard will take the helm as P&G's profit margins are under pressure from rising commodity prices. Given Mr. Pritchard's most recent role studying productivity companywide, the cost-effectiveness of P&G's ad spending likely will receive particular scrutiny.

Mr. Pritchard also will have to decide whether to accelerate the shift of ad dollars to digital media, such as the Web and cellphones, a question of enormous importance to traditional media outlets like television and magazines. P&G -- which pioneered television advertising -- has lagged in the shift to digital marketing. That has been a missed opportunity for P&G, analysts say.

Still, Mr. Pritchard's power is somewhat limited. Despite overseeing P&G's world-wide marketing, the post usually commands more influence outside of the walls of the Cincinnati consumer-products giant than inside, ad executives say. Media buyers say that P&G's brand managers have final say over ad spending and how to position a brand in ads.

"Being global marketing officer at P&G is like being a manager without portfolio -- lots of responsibility and not much authority," says Dave Hardie, managing director for recruiters Herbert Mines Associates. "The budgets lie in the business units and key decisions seem to be there."

Despite those limits, Mr. Stengel had an enormous impact on P&G's marketing strategy. In his tenure he successfully pushed the consumer products titan to rethink its once-staid approach to advertising. Instead of focusing on product demonstrations, P&G began using more humorous, attention-grabbing ads.

Mr. Stengel is expected to join a university and may also have a role at a new marketing company dubbed the "Purpose Institute," which is being created by GSDM Idea City, owned by Omnicom Group, according to a person familiar with the matter.

Mr. Pritchard has spent his entire career at P&G where he is credited with broadening the Crest brand. He also played a critical role in developing P&G's blockbuster Olay skin care business, turning around its market share in the early 1990s after a five-year decline. While an executive in P&G's cosmetics business, Mr. Pritchard developed the "Easy, Breezy, Beautiful, Cover Girl" campaign, still in use today.

Outside P&G, the new marketing chief could have a big impact on ad agencies that deal with the deep-pocketed company. During Mr. Stengel's reign, he convinced brand managers to add Oregon independent agency Wieden & Kennedy to its roster, dramatically boosting the business of the agency.