Caremark Sends Letter to Shareholders Explaining Compelling Value of CVS Merger, Serious Risks of Express Scripts Proposal.Urges Vote "For" CVS/Caremark Merger On February February: see month. 20 NASHVILLE Nashville, city (1990 pop. 487,969), state capital, coextensive with Davidson co., central Tenn., on the Cumberland River, in a fertile farm area; inc. as a city 1806, merged with Davidson co. 1963. , Tenn. -- Caremark Rx  The introduction to this article may be too long. Please help improve the introduction by moving some material from it into the body of the article according to the suggestions at , Inc. (NYSE NYSESee: New York Stock Exchange : CMX CMX Corel Presentation Exchange (file extension) CMX Cisco Mobile Exchange CMX Cloaca Maxima (sewage system of ancient Rome; Finnish rock band) CMX Crisis Management Exercise ) today sent a letter to the Company's shareholders detailing the compelling strategic and financial benefits of its pending merger with CVS (1) (Concurrent Versions System) A version control system for Unix that was initially developed as a series of shell scripts in the mid-1980s. CVS maintains the changes between one source code version and another and stores all the changes in one file. Corporation (NYSE: CVS). Caremark reiterated its belief that the merger with CVS will deliver immediate and concrete value to shareholders and has a high certainty CERTAINTY, UNCERTAINTY, contracts. In matters of obligation, a thing is certain, when its essence, quality, and quantity, are described, distinctly set forth, Dig. 12, 1, 6. It is uncertain, when the description is not that of one individual object, but designates only the kind. Louis. of completion in approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. one month. The Company believes the transaction is the most effective way to address the rapidly changing dynamics of the pharmaceutical services industry and urged shareholders to vote FOR the CVS/Caremark merger at the Caremark Special Meeting on February 20, 2007. In the letter, Caremark's Chairman, Chief Executive Officer and President Mac Crawford outlined the Company's belief that the CVS merger is financially superior to Express Scripts' hostile and highly conditional Subject to change; dependent upon or granted based on the occurrence of a future, uncertain event. A conditional payment is the payment of a debt or obligation contingent upon the performance of a certain specified act. proposal and will create significant value for customers by introducing new products and services. Further, Caremark believes the Express Scripts proposal is highly risky, will destroy shareholder value, will potentially result in the loss of large customer contracts, and is clearly not in the best interests of Caremark or its shareholders. The text of the letter follows:
January 23, 2007
VOTE FOR THE CVS/CAREMARK MERGER -
THE BEST VALUE AND CERTAINTY FOR CAREMARK SHAREHOLDERS
Dear Fellow Shareholder:
For more than eight years, your Caremark management team and Board
have consistently delivered exceptional performance - generating total
returns of over 1300% - and remain focused on maximizing value for all
shareholders.
On November 1, 2006, CVS and Caremark announced that we had entered
into a definitive agreement to combine our companies in a merger of
equals, creating the nation's premier integrated pharmaceutical
services provider and providing substantial strategic and financial
benefits.
Caremark believes that the merger with CVS is the most effective way
to address the rapidly changing dynamics of the pharmaceutical
services industry. Together with CVS, we will define and lead the
transformation of the industry and significantly improve the delivery
of pharmaceutical services, differentiating us from our competitors
and creating significant value for shareholders.
We strongly support a merger with CVS which:
-- Delivers immediate and concrete value;
-- Has high certainty of completion;
-- Provides compelling strategic and financial benefits; and
-- Is led by an established team from both companies with a strong
track record of creating value.
Your Company has carefully considered other alternatives, including
remaining independent, as well as an unsolicited proposal from Express
Scripts. We strongly believe that the Express Scripts proposal is
highly risky and conditional, destructive to shareholder value and
clearly not in the best interests of Caremark or its shareholders.
THE CAREMARK BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU VOTE
"FOR" THE ADOPTION OF THE CVS/CAREMARK MERGER AGREEMENT
AND APPROVAL OF THE MERGER
WHY YOU SHOULD VOTE "FOR" THE CVS/CAREMARK TRANSACTION
IMMEDIATE AND CONCRETE VALUE
You will receive 1.67 shares of CVS/Caremark stock for each share of
Caremark stock you own in this merger of equals transaction, allowing
you to fully benefit from the enhanced growth potential of this
exciting new company. In addition, Caremark shareholders will receive
a special one-time cash dividend of $2.00 per share, payable promptly
upon closing of the transaction with CVS, which is expected in
February 2007 following shareholder approvals.
In comparison, Express Scripts' offer is approximately half cash and
would be unlikely to close until at least the third quarter of this
year according to Express Scripts' own timetable. In fact, in its
amended proxy filed on January 22nd, Express Scripts further hedged on
timing, acknowledging that there are no assurances that even a third
quarter close can be met. Clearly, a dollar today is worth more than a
dollar many months from now. When one properly discounts the cash
Express Scripts may or may not deliver a half year or more from now,
the present value of their offer is conservatively worth $2.00 to
$3.00 less per share than the nominal value of their bid and less than
the Caremark/CVS merger. Therefore, Express Scripts' so-called premium
turns out to be no premium at all.
Express Scripts also has argued that the remaining value of its
proposal can be derived by applying its proposed exchange ratio to its
current stock price. The truth is that there is no way of knowing what
the value of the Express Scripts proposal would be following antitrust
review and a lengthy period of uncertainty and potential significant
business dislocations. We also don't know if they might try to reduce
the value of their proposal after a period of prolonged uncertainty.
We believe strongly that both the value represented by the CVS merger
consideration and the long-term intrinsic opportunity that will be
created by this combination exceed the value of Caremark on an
independent stand-alone basis and are far superior to the Express
Scripts proposal.
HIGH CERTAINTY OF COMPLETION
The CVS/Caremark merger has already received all the necessary
regulatory approvals from the FTC and SEC. The upcoming shareholder
votes are the last step in this process. We anticipate closing this
transaction immediately following your approval of this merger on
February 20(th) and approval by CVS' shareholders at their meeting on
February 23(rd).
In comparison, Express Scripts' proposal is highly contingent and
conditional to such an extent that it is largely illusory. In fact, it
is by no means clear that the alternative offered to a CVS transaction
would be an agreement with Express Scripts, particularly given the
highly unusual conditions Express Scripts is proposing as part of
their offer, including:
-- A due diligence review;
-- Satisfaction of financing conditions;
-- Anti-trust and other regulatory approvals; and,
-- Approval by their own shareholders - a process they have not
even begun and, which by their own admission, would prevent
their illusory February 13 deadline from even occurring.
These risks could substantially delay closing, could prevent closing
altogether, or could result in the imposition of conditions that would
adversely impact the value of the combined business, the amount of any
projected synergies, Express Scripts' ability to obtain financing for
the transaction and the terms of any such financing. Until all of
these conditions are met, shareholders face the possibility that
Express Scripts may unilaterally reduce or withdraw its proposal based
on any of these factors or otherwise.
COMPELLING STRATEGIC AND FINANCIAL BENEFITS
For more than eight years, Caremark's management and Board have
continuously transformed the Company to improve its competitiveness
and create enormous shareholder value. The first phase focused on
creating a profitable growing business with a strong balance sheet,
while the second phase substantially increased the Company's scale and
competitiveness through the acquisition and successful integration of
AdvancePCS.
The planned merger with CVS represents the next phase of the company's
evolution. This strategy stems from an extensive review of Caremark's
existing business, the external factors impacting us and the industry
and the opportunities for future growth. Your Board and management
examined all the options available to create further value for
shareholders and determined that simply creating a larger PBM would
not drive the most value for either our shareholders or our customers.
Our customers and consumers are excited about this transaction. This
transaction will create significant value for our customers by
introducing new products and services. Our customers have been asking
us for some time to bring our services closer to consumers, as
consumers are becoming increasingly involved in making their own
healthcare decisions through changes in plan design, the adoption of
consumer-directed plans and, of course, the introduction of Medicare
Part D. CVS's powerful direct relationship with the consumer and
exciting services like MinuteClinic allow us to do just that.
Our shareholders will realize greater financial benefits. Based on a
thorough integration analysis, we have conservatively estimated annual
cost synergies in excess of $500 million. Moreover, we expect to
achieve between $800 million and $1 billion in incremental revenues in
2008 and significantly more thereafter. CVS/Caremark will also have a
very strong financial position, with low debt and strong cash flow
generation. This will provide the company with continued financial
flexibility, allowing us to further invest in our business and
continue to return value to shareholders through continuation of
dividends and future share buybacks. As we previously announced, the
combined company will undertake an accelerated share repurchase
program that will retire 150 million of the outstanding shares of the
combined company (approximately 10 percent of the combined company's
outstanding shares) promptly following closing. We expect the share
retirement to enable the new company to achieve double-digit
cents-per-share accretion in 2008 and significantly increase the
combined company's return on equity.
In comparison, the Express Scripts proposal raises substantial
concerns about the significant value destruction associated with
customer losses, high leverage ("junk credit") and high regulatory
risks. Caremark has won approximately $1 billion in net revenues from
Express Scripts since 2004. Many of these clients have left Express
Scripts over dissatisfaction with service and performance, and we
believe there is a substantial risk that Caremark would lose these
clients in the event that Express Scripts acquires Caremark. Caremark
is also in the midst of the 2007 selling season and has large
strategic accounts currently out for bid. Uncertainty regarding a
potential transaction with Express Scripts will put these accounts at
risk and likely result in Caremark not being the vendor selected for
these or other new contracts. Express Scripts' claim of $500 million
in synergies is illusory given the likely customer defections, as well
as the loss of customers that would accompany a protracted closing
process during the current selling season.
ESTABLISHED LEADERSHIP TEAM WITH A TRACK RECORD OF CREATING VALUE
Finally, the Caremark and CVS management teams have a proven track
record of creating significant shareholder value and successfully
integrating mergers of this size and scale. Since late 1998,
Caremark's share price has appreciated by over 1300%, as a result of
organic growth and acquisitions. In fact, we have already begun
planning for integration and are very pleased with how this process is
progressing.
In comparison, Express Scripts has had difficulty integrating even
small acquisitions. The transaction proposed by Express Scripts would
be roughly 20x the size of the largest transaction Express Scripts has
undertaken in the past -- and Caremark is nearly three times bigger
than Express Scripts itself. Given Express Scripts' poor track record
of integrating its prior mergers, history of integration cost
overruns, management attrition as well as other problems, we have
substantial concerns that Express Scripts could successfully execute a
merger with Caremark, especially given the vastly different operating
and business strategies of the two companies.
DO NOT PUT YOUR INVESTMENT AT RISK.
We have been deeply gratified by the support we have received from our
customers over the last few months. In our meetings with institutional
investors and others, we have received positive feedback and have seen
a growing appreciation of the compelling logic of the CVS/Caremark
merger. In the end, you will have the final say in this process. We
strongly believe the CVS/Caremark merger is in your best financial
interests and believe that shareholders will support our Board's and
management's strategy of building the nation's premier integrated
pharmacy services provider.
We are sending you our proxy materials under separate cover. Please
give this information your prompt and careful attention.
PROTECT YOUR INVESTMENT!
WE URGE YOU TO VOTE "FOR" THE CVS/CAREMARK MERGER TODAY--BY TELEPHONE,
BY INTERNET OR BY SIGNING, DATING AND RETURNING THE WHITE PROXY CARD.
On behalf of our Board and our management team, thank you for your
support.
Sincerely,
Mac Crawford
Chairman, Chief Executive Office and President
If you have questions about the proposed merger, or need assistance in
voting your shares, please call the firm assisting us in the
solicitation of proxies:
INNISFREE M&A INCORPORATED
Toll-Free at 877-750-9498
(Banks and Brokers may call collect at 212-750-5833.)
For more information on the transaction, including access to all
Caremark press releases and public filings, please go to
www.caremarkrx.com
About Caremark Caremark is a leading pharmaceutical services company, providing through its affiliates comprehensive drug benefit services to over 2,000 health plan sponsors and their plan participants Plan participants Employees or other beneficiaries who are eligible to receive benefits from a company's employee benefit plan. throughout the U.S. The company's clients include corporate health plans, managed care organizations, insurance companies, unions, government agencies and other funded benefit plans. In addition, Caremark is a national provider of drug benefits to eligible beneficiaries under the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. Part D program. The company operates a national retail pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. network with over 60,000 participating pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major , seven mail service pharmacies, the industry's only FDA-regulated repackaging plant and 21 licensed specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. pharmacies for delivery of advanced medications to individuals with chronic or genetic diseases and disorders A
Additional information about Caremark is available at www.Caremark.com Important Information for Investors and Stockholders CVS has filed with the SEC a registration statement on Form S-4 that was declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. effective by the SEC on January January: see month. 19, 2007. This registration statement includes a joint proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. statement/prospectus in connection with the proposed merger. Caremark and CVS urge investors and stockholders to read the joint proxy statement/prospectus and any other relevant documents filed by either party with the SEC because they contain important information. Investors and stockholders are currently able to obtain the joint proxy statement/prospectus and other documents filed with the SEC free of charge at the website maintained by the SEC at www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . In addition, documents filed with the SEC by Caremark will be available free of charge on the investor relations Investor relations The process by which the corporation communicates with its investors. portion of the Caremark website at www.caremark.com. Documents filed with the SEC by CVS will be available free of charge on the investor relations portion of the CVS website at http://investor.cvs.com. Investors and stockholders may obtain a detailed list of names, affiliations and interests of participants in the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of proxies of Caremark stockholders to approve the merger at the following address: Innisfree M&A Incorporated, 501 Madison Avenue Madison Avenue, celebrated street of Manhattan, borough of New York City. It runs from Madison Square (23d St.) to the Madison Bridge over the Harlem River (138th St.). In the 1940s and 50s, some of the major U.S. , 20th Floor, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , New York 10022. Caremark, and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the merger. A description of the interests of Caremark's directors and executive officers in Caremark is set forth in the proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. for Caremark's 2006 annual meeting of stockholders, which was filed with the SEC on April 7, 2006. CVS, and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of CVS in connection with the merger. A description of the interests of CVS's directors and executive officers in CVS is set forth in the proxy statement for CVS's 2006 annual meeting of stockholders, which was filed with the SEC on March 24, 2006. If and to the extent that any of the Caremark or CVS participants will receive any additional benefits in connection with the merger that are unknown as of the date of this filing, the details of those benefits are described in the definitive joint proxy statement/prospectus relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the merger. Investors and stockholders can obtain more detailed information regarding the direct and indirect interests of Caremark's and CVS's directors and executive officers in the merger by reading the definitive joint proxy statement/prospectus. Cautionary Statement Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This document contains certain forward-looking statements about CVS and Caremark. When used in this document, the words "anticipates", "may", "can", "believes", "expects", "projects", "intends", "likely", "will", "to be" and any similar expressions and any other statements that are not historical facts, in each case as they relate to CVS or Caremark or to the combined company, the management of either such company or the combined company or the transaction are intended to identify those assertions as forward-looking statements. In making any of those statements, the person making them believes that its expectations are based on reasonable assumptions. However, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected or anticipated. These forward-looking statements, including, without limitation, statements relating to anticipated accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the , return on equity, cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. , incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. revenues and new products and offerings, are subject to numerous risks and uncertainties. There are various important factors that could cause actual results to differ materially from those in any such forward-looking statements, many of which are beyond the control of CVS and Caremark, including macroeconomic mac·ro·ec·o·nom·ics n. (used with a sing. verb) The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. condition and general industry conditions such as the competitive environment for retail pharmacy and pharmacy benefit management A Pharmacy Benefit Manager (PBM) is a third party administrator of prescription drug programs. They are primarily responsible for processing and paying prescription drug claims. companies, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. matters and risks, legislative developments, changes in tax and other laws and the effect of changes in general economic conditions, the risk that a condition to closing of the transaction may not be satisfied, the risk that a regulatory approval that may be required for the transaction is not obtained or is obtained subject to conditions that are not anticipated and other risks to consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the transaction. The actual results or performance by CVS or Caremark or the combined company, and issues relating to the transaction, could differ materially from those expressed in, or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by, any forward-looking statements relating to those matters. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of CVS or Caremark, the combined company or the transaction. |
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