While some doubt federal regulators would allow that kind of market power, Longs has achieved it on its own. Rankings by Chain Drug Review showed that Longs operated 69% of the drugstores located in booming Honolulu. Walgreen has approached that dominance in several other markets, but has made no wave.
"If the FTC (Federal Trade Commission) concludes that a Walgreens/Longs transaction would have an anticompetitive effect in Hawaii," CVS stressed in a recent letter to Longs' board, "it would require divestiture of most -- if not all -- of the Longs Hawaiian stores."Obviously, CVS hopes to win control of Longs' 521-drugstore chain for itself. CVS has an agreement to buy Longs for $71.50 a share, but the company faces resistance from Longs investors, who view the offer as too low, and then received a higher $75-a-share bid from Walgreen. Walgreen hopes to secure hundreds of Long drugstores located in high-priced markets like California and Hawaii. If necessary, however, Walgreen will shed some of those drugstores as long as it doesn't have to sacrifice more than 40% of Longs' overall profit in the process. Walgreen doubts that "anything even approaching (that) threshold" will be required. Last week, the FTC requested detailed information about three different markets -- including Hawaii -- as it reviewed the competitive impact of Walgreens' proposed deal. While some saw this as a clear warning sign, the agency asked for data on mail-order traffic as well. Walgreens offers mail-order service, but it doesn't own one of the huge pharmacy-benefits managers that tend to dominate that business.