Sept. 14 (Bloomberg) -- Longs Drug Stores Corp., the California retailer that received a $75-a-share offer from Walgreen Co., said it recommends shareholders accept CVS Caremark Corp.'s month-old, $71.50-a-share bid.

Walnut Creek, California-based Longs confirmed the $3 billion Walgreen offer and said today it will consider the bid. Walgreen of Deerfield, Illinois, the largest U.S. pharmacy chain, offered to buy Longs on Sept. 12, one month after CVS disclosed its offer.

Walgreen's bid puts pressure on CVS to either increase its price or risk losing a chance to add drugstores in two of the fastest-growing U.S. states, Nevada and Arizona. Longs, which has 521 stores, also operates in California and Hawaii.

The Walgreen bid may involve ``some complexities associated with getting the transaction completed on a timely basis,'' said Matt Kaufler, a fund manager at Rochester, New York-based Clover Capital Management Inc., which oversees $2.8 billion, including more than 440,000 CVS shares. ``They just don't think it's worth the effort and the risk for $3.50-a-share more.''

The two institutional investors holding the highest number of Longs' shares, Advisory Research Inc. and William Ackman's Pershing Square Capital Management LP, have urged the company to seek a higher offer. The stock has closed above CVS's $71.50-a- share offer every day but three in New York trading since the agreement was disclosed.

CVS

CVS today extended the deadline for its offer to midnight New York time Oct. 15.

``Our offer represents a full and fair price for Longs shares, and we stand firm on our price,'' Chief Executive Officer Tom Ryan said in a statement distributed by Business Wire.

CVS, the second-largest U.S. drugstore company, said it will buy Longs to gain locations in the western U.S. Woonsocket, Rhode Island-based CVS needs at least two-thirds of Longs' stockholders to tender their shares.

The Walgreen bid is a cash proposal. The company also is willing to pay the $115 million termination fee required to break up the CVS transaction.

Walgreen disclosed the bid almost four hours after the end of New York Stock Exchange composite trading.

Longs, which has gained more than 50 percent this year, jumped $2.84, or 4 percent, to $74.50 at 7:59 p.m. after the close of New York trading on Sept. 12. CVS declined 2 cents to $37.64 in regular trading before the announcement, and Walgreen fell 60 cents to $36.07.

Walgreen said it's working with real-estate investors Lubert-Adler Management Co. and Klaff Realty LP to ``address any potential store sales in connection with the transaction.''

Goldman, Sachs & Co. is giving Walgreen financial advice, and Weil, Gotshal and Manges LLP is serving as its legal adviser.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net.

Last Updated: September 14, 2008 19:18 EDT