M&A

Caremark Stands by CVS Merger Bid

The pharmacy benefit manager's board asserts that the higher Express Scripts offer ''is not in the best financial or strategic interests of Caremar...
Stephen TaubJanuary 8, 2007

Caremark Rx has rejected a $26 billion hostile bid from rival pharmacy benefit manager Express Scripts in favor of a $21.2 billion offer previously tendered by drugstore giant CVS.

“The board has unanimously concluded that pursuing discussions with Express Scripts is not in the best financial or strategic interests of Caremark and its shareholders,” Caremark stated in a press release late Sunday. In its own statement, CVS stressed that the hostile offer carries “significant antitrust risk that could well prevent it from ever being approved and, at a minimum, would substantially delay closing of the transaction.” Caremark and Express Scripts are two of the three largest pharmacy benefits managers in the United States.

In a press release, Express Scripts stated that last week it filed the relevant Hart-Scott-Rodino notifications and “anticipates obtaining regulatory clearance in a timely manner.” In addition, it disclosed that it has received commitment letters from Citigroup and Credit Suisse to fully finance the proposed transaction.

And once again, the company asserted that its offer is superior to the one made by CVS. “Caremark stockholders and the marketplace as a whole have demonstrated their strong support for our offer,” added Express Scripts. “We believe that Caremark is attempting to use antitrust as a red herring to distract stockholders from the real value differential at issue.”

On November 1, CVS said it planned to acquire Caremark for about $21.8 billion in stock; on December 18, offered $26 billion in stock and cash.

The Associated Press also reported that last week, a federal judge in Nashville, Tennessee, where Caremark is headquartered, dismissed a lawsuit filed by a Pennsylvania pension company with an investment in Caremark stock. That suit had attempted to stop the CVS deal on the grounds that it favors insiders over other shareholders. The judge ruled that the lawsuit was almost identical to one that is further along in state court in Delaware, where Caremark is incorporated, according to the wire service.