Caremark Says No to Express Scripts Deal

Customers take advantage of the drive through pharmacy window outside a CVS drug store in a Bainbridge Twp., Ohio file photo from Aug. 3, 2006. Some Caremark Rx shareholders go to court to try to force the Nashville-based pharmacy benefits manager to take a harder look at a buyout bid from Express Scripts. Caremark has agreed to be bought by drug store chain CVS Corp. (AP Photo/Amy Sancetta, File) (Amy Sancetta - AP)

NASHVILLE, Tenn. -- Facing rejection from Caremark Rx Inc. in response to its hostile buyout offer, Express Scripts Inc. is still working to move the deal forward with an attempt to put four sympathetic members on the company's board of directors.

But officials with drug store operator CVS Corp., which plans to acquire Caremark with $21 billion in stock in a deal that could be completed by March, says the proxy move would be a last-ditch effort for a buyout with little chance of regulatory approval.

Maryland Heights, Mo.-based Express Scripts contends that its $26 billion stock and cash offer would offer a 13 percent premium for shareholders over what Woonsocket, R.I.-based CVS is offering. The premium has prompted shareholder lawsuits, but Caremark officials aren't biting.

"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 officials said in a statement Monday.

CVS officials called the effort to control Caremark's board "a publicity stunt" and said combining two of the nation's largest pharmacy benefits managers wouldn't meet the antitrust scrutiny that the CVS and Caremark deal already passed last month.

With the next Caremark shareholder meeting not scheduled until May, CVS officials repeated their assertions that the combined buying power and integration of what would be called CVS/Caremark Corp. would result in better strategic value for shareholders.

Express Scripts Chief Executive George Paz urged health care professionals attending a JPMorgan Health Care conference Monday to support its bid for Caremark, touting the company's record in buyouts of other rival pharmacy benefit managers.

"I would ask you, if you also share our views, reach out to the Caremark management team and directors and also tell them that you see a lot of value in PBM-to-PBM maneuvers," he said.

While some shareholders are still hopeful for a pending lawsuit to block the CVS deal, some analysts said the chances for Express Scripts are slim.

A Louisiana pension company with a block of Caremark stock has filed a lawsuit in Delaware, where the company is incorporated. An injunction hearing is set for March 20 or earlier if a shareholder meeting to vote on the CVS deal is set, documents show.

The lawsuit seeks to block the CVS deal, claiming it's designed to benefit Caremark insiders. A similar lawsuit filed in federal court in Nashville was dismissed in favor of the Delaware suit.

"Caremark stockholders and the marketplace as a whole have demonstrated their strong support for our offer, which clearly provides Caremark stockholders with superior value to the proposed acquisition of Caremark by CVS Corp.," Express Scripts said in a statement.