Express Scripts starts $25B Caremark bid

Pharmacy benefits manager Express Scripts Inc. said Tuesday it has begun its $25 billion offer for all outstanding shares of rival Caremark Rx Inc., which has rejected the bid in favor its deal with the drugstore operator CVS Corp.

Under the terms of its offer, Express Scripts is offering Caremark stockholders $29.25 in cash and 0.426 shares of Express Scripts stock for each share of Caremark stock.

Based on closing stock prices on Friday, the Express Scripts offer has a value of $56.87 per share, or approximately $25 billion total, and provides Caremark stockholders with a 7 percent premium to the current value of the CVS proposal.

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

Express Scripts, based in Maryland Heights, Mo., launched its bid then worth about $26 billion for Caremark on Dec. 18. Caremark rejected the offer early this month, but Express Scripts has persisted.

"While we would prefer to meet with the Caremark board and management to negotiate a transaction between Express Scripts and Caremark, we are taking this action in light of the Caremark board's rejection of and refusal to even discuss our superior proposal," Express Scripts said in new release.

Caremark spokeswoman Nina Devlin said on Tuesday that Express Scripts' tender offer is "nothing new and nothing unexpected" and that the company remains committed to its deal with CVS.

Nashville-based Caremark has argued that it is unlikely regulators would approve of a deal combining two of nation's three biggest pharmacy benefit providers.

Express Scripts' offer and withdrawal rights are scheduled to expire Feb. 13.

Whether the Caremark and CVS merger goes through may depend on a shareholder vote expected in mid-March or a Delaware judge considering a Caremark shareholder lawsuit that claims the deal benefits Caremark executives more than shareholders.

Express Scripts attorneys last week asked a Delaware court to void a $675 million breakup fee because they argue it unlawfully locks Caremark into the deal with CVS.

In afternoon trading, Caremark shares fell 68 cents to $56.15 and CVS shares fell 24 cents to $31.70 on the New York Stock Exchange. Express Scripts shares rose 90 cents to $65.73 on the Nasdaq Stock Market.

Express Scripts Chief Executive George Paz said during a teleconference Tuesday that the Federal Trade Commission and the company's shareholders must approve the exchange offer for all outstanding Caremark shares.

Paz said the company's lawyers have been in talks with the FTC, which is expected to submit an answer within the next 30 days.

Express Scripts and Caremark executives have talked about merging and other "possible combinations" on "numerous occasions" in the past, said Paz, though he did not say when the most recent meetings occurred.

Gregg Haddad, an analyst with First Analysis Securities Corp. in Chicago, said the Express Scripts tender offer "is just another tactic on Express Scripts' part to reach the conclusion it wants."

"I think it makes sense," he said. "Time is of the essence from Express Scripts' perspective. CVS obviously has the upper hand here. So it's really incumbent upon Express Scripts to keep its proposal in front of the (Caremark) shareholders."

Whether the Caremark and CVS merger goes through will be determined by a shareholder vote expected in mid-March or a Delaware judge considering a Caremark shareholder lawsuit that claims the deal benefits Caremark executives more than shareholders.

Express Scripts attorneys last week asked a Delaware court to void a $675 million breakup fee because they argue it unlawfully locks Caremark into the deal with CVS.

In afternoon trading, Caremark shares fell 68 cents to $56.15 and CVS shares fell 24 cents to $31.70 on the New York Stock Exchange. Express Scripts shares rose 90 cents to $65.73 on the Nasdaq Stock Market.

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On the Net:

Caremark Rx: http://www.caremark.com

CVS Corp: http//http://www.cvs.com

Express Scripts Inc.: http://www.express-scripts.com