August 13, 2008 / 3:22 PM / 10 years ago

UPDATE 1-Credit Suisse upgrades Longs Drug Stores to neutral

(Recasts, changes source, adds details, share movement)

Aug 13 (Reuters) - Credit Suisse upgraded Longs Drug Stores Corp LDG.N to “neutral” from “underperform” on the company’s pending acquisition by CVS Caremark Corp (CVS.N).

Credit Suisse had downgraded Longs Drug on Tuesday before the deal was announced and had said it did not see Longs Drug as a great fit for CVS.

The brokerage still believes the deal is not a compelling strategic fit, but reversed its rating on Longs Drug stock as it expects the transaction to go through.

CVS Caremark said on Tuesday it would buy smaller rival Longs Drug for $71.50 a share in cash for a total purchase price of $2.9 billion, including debt, to increase its presence in California and broaden its prescription services.

Credit Suisse raised its price target on the stock to $71.50 from $42.

Standard & Poor’s Equity Research also lifted its price target on the stock by $15 to $72, but kept its “hold” rating.

Raymond James cut its price target on CVS to $47 from $50 and said a lukewarm investor reaction to the deal could limit near-term growth.

Longs Drug shares jumped 30 percent to $70.35 in morning trade on the New York Stock Exchange, while CVS shares were down about 2 percent at $37.38. (Reporting by Vidya L Nathan in Bangalore; Editing by Himani Sarkar)

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