updated 9/15/2008 5:20:51 PM ET 2008-09-15T21:20:51

Investors seemed to anticipate a bidding war for Longs Drug Stores Inc., sending shares above even the level of Walgreen Co.’s surprise $75-per-share offer, even as several of the largest shareholders in Longs took a wait-and-see attitude.

Late Friday, Walgreen offered to buy the chain for $75 per share, or about $2.8 billion, topping an offer of $71.50 per share from CVS Caremark Corp. Although CVS indicated is does not plan to make a new bid for Longs, the stock rose beyond the price of Walgreen’s offer, hitting all-time highs above $76 per share.

CVS made its bid for Walnut Creek, Calif.-based Longs in August, and in recent weeks, several major shareholders in Longs had said CVS was undervaluing the company’s real estate. They contended Longs could have done better, and that the bidding was not transparent enough, so shareholders did not know if they were getting a fair deal.

David Heller of Advisory Research said Deerfield, Ill.-based Walgreen is valuing Longs’ operations or real estate very differently than CVS did. Including a $115 million breakup fee that will be paid to CVS if Longs is sold to another company, he said Walgreen’s bid is about $6.50 greater, an increase of almost 10 percent.

Heller said Longs should be open to all bidders. Last week, another stakeholder, Pershing Square Capital Management, said it had identified four potential buyers for Longs.

“There are other people out there who have an interest in Longs Drugs,” he said. “The process was a flawed process that Longs went through.”

A Longs representative said the company is reviewing the Walgreen offer and will not comment on the process of selling itself.

If the deal is completed, it would add Longs’ 521 stores to Walgreen’s nationwide total of 6,443. Walgreen has stores in every state except Alaska.

Heller said Advisory Research has not decided if it will tender its shares for Walgreen’s offer. Advisory Research and Pershing Square both own more than 3 million share of Longs stock, or about 18 percent combined.

A spokesman for Walgreen said he could not comment on the value the company placed on Longs’ real estate or its operations.

Richard Clayton of CtW Investment Group said Longs never conducted an internal evaluation of its real estate and never sought an independent appraisal.

“(The new offer) is evidence that there’s a lot more value in this company than what CVS has been willing to pay so far,” he said. “It’s very clear to us that the Longs board failed to pursue an appropriate process in determining the best price available.”

CtW works with pension funds sponsored by unions connected to the Change to Win federation of unions. Those funds, along with public employee funds, hold more than half a million Longs shares, or roughly a 1.4 percent stake.

Longs shares gained $4.09, or 5.7 percent, to close at $75.75. Earlier, despite a steep decline in the broader markets, they hit a high of $76.46.

Walgreen shares fell $1.80, or 5 percent, to $34.27. CVS stock dipped $1.12, or 3 percent, to $36.52.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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