Citi Maintains 'Hold' on AmerisourceBergen (ABC), Sees Higher Risk After CVS Acquisition of Longs Drug Stores

August 13, 2008 8:19 AM EDT

Citi maintains 'Hold' rating on AmerisourceBergen (NYSE: ABC), but moves risk rating from Medium to High. Price target $46.

Citi analyst says, "CVS/Caremark (NYSE: CVS) announced it will acquire Longs Drug Stores (NYSE: LDG) after market close. AmerisourceBergen is the primary drug distributor to Longs Drug Stores that we believe makes up ~$2 billion or 3%-4% of ABC total annual revenues. This is overall unfavorable to AmerisourceBergen as it increases the risk of possible contract loss to CVS’ current retail store distributor and favorable to CVS’ incumbent retail drug dist. CAH that’s up for renewal in mid-2009 where LDG could add ~2% to total company revenue...While this account has not been lost and may remain with ABC, it raises the co’s risk profile with less offsetting diversified businesses to mute any possible negative impact."

AmerisourceBergen Corporation (AmerisourceBergen) is a pharmaceutical services company, with operations in the United States, Canada and the United Kingdom.

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