Judge Rules for Caremark on Bid Review

NASHVILLE, Tenn. -- Shareholders who claim that Caremark Rx Inc. insiders are looking out for themselves instead of general stock owners by pursuing a merger deal with CVS Corp. lost a bid Friday to get a judge to order the company to consider a hostile buyout bid by rival Express Scripts Inc.

U.S. District Court Judge Aleta Trauger rejected a motion filed late Thursday in a lawsuit that challenges the CVS deal, saying that Nashville-based Caremark had indicated it intends to consider the Express Scripts offer.

"It is reasonable to suppose that this review will be taking place after the New Year," the judge wrote. "Certainly the plaintiff has failed to establish anything contrary to that reasonable assumption."

Paul Warner, an Houston-based attorney for the plaintiffs in the lawsuit, said the plaintiffs would ask Trauger early next week to reconsider the motion.

Woonsocket, R.I.-based CVS, the nation's largest operator of drugstores, said on Nov. 1 that it planned to acquire Caremark for about $21.2 billion in stock.

Maryland Heights, Mo.-based Express Scripts launched its $26 billion bid for Caremark Monday. Caremark and Express Scripts are the No. 2 and No. 3 largest pharmacy benefits managers in the country.

The CVS offer is for stock in the company, and the Express Scripts offer includes a cash option and premium for shareholders.

Caremark and CVS announced Thursday that their deal has passed the antitrust scrutiny of the U.S. Federal Trade Commission and could be completed by the first quarter of 2007.

The lawsuit filed last month by the Iron Workers of Western Pennsylvania Pension Plan contends the CVS agreement would "provide certain Caremark insiders and directors with preferential treatment."

It points in particular to a "golden parachute" for Caremark President and CEO Edwin "Mac" Crawford that totals $48 million in stock, severance payments and consulting fees. Other executives would keep their positions as well.

Shareholders, by contrast, would get 1.67 shares of CVS stock for each share of Caremark stock they own for a value of approximately $52 per share. Caremark shares traded as high as $59.25 in September and has been in the mid-50s since the Express Scripts offer was publicized.

"We're not trying to stop the deal dead in its track," said Warner, the plaintiff's attorney. "We're trying to take out some of these unfair provisions."