Caremark Shareholders Approve CVS Offer

A hostile bid by rival pharmacy-benefits manager Express Scripts had raised antitrust concerns.
Stephen TaubMarch 16, 2007

Pharmacy-benefits manager Caremark Rx has announced that shareholders have approved its $26.5 billion acquisition by drugstore giant CVS Corp., creating the largest combined mail-order and retail provider of medicine, according to Bloomberg.

The announcement effectively ends a contentious, three-month competition between the drugstore chain and a Caremark rival, Express Scripts, which had bid $27.5 billion. That offer raised antitrust concerns, however: Caremark and Express Scripts are two of the three largest administrators of employer-sponsored prescription-drug programs.

“We are gratified that Caremark shareholders have recognized the compelling strategic and financial benefits of this groundbreaking merger,” said chairman, chief executive officer, and president Mac Crawford in a statement. “Caremark and CVS now have an historic opportunity to define and lead the continuing evolution of the pharmaceutical services industry and build on both companies’ records of creating value for our shareholders and customers.”

“Today’s vote reinforces the compelling logic underpinning the merger of the nation’s largest pharmacy chain with the leading pharmacy services company and speaks to the tremendous opportunity we have before us,” said CVS chairman, president, and chief executive officer Tom Ryan in a statement. “We have said from the beginning that this combination will transform the way pharmacy services are delivered, enabling consumers to benefit from enhanced health-care services and improved outcomes, and for payers to benefit from more effective cost management tools.”

CVS expects the transaction to close next week, as soon as the vote is certified by the independent inspector of election. Shortly thereafter, Caremark shareholders will receive a special cash dividend of $7.50 per share.

Bloomberg points out that the newly combined company — to be called CVS/Caremark — will offer stronger competition to Wal-Mart’s 3,850 pharmacies, which offer discounted prices on generic drugs. In addition, CVS will now have more clout when negotiating prices with drugmakers, and will be better positioned to slow the defection of pharmacy customers who have been filling prescriptions through other channels — for example, by mail, through companies like Caremark.

“The merger between CVS and Caremark is a revolutionary event within the health-care delivery network that should benefit payers, customers, and shareholders alike,” wrote William Dreher, an analyst with Deutsche Bank, according to Bloomberg.