Express Scripts outbids CVS for Caremark

Express Scripts Inc. on Monday announced it will buy Caremark Rx Inc. for $26 billion, in order to create the world's preeminent pharmacy benefit management company and edge out the rival CVS Corp., which had struck a deal with Caremark, last month.

St. Louis, Missouri-based Express Scripts said it would acquire all the outstanding shares of Caremark for $29.25 in cash and 0.426 shares of Express Scripts stock for each share of Caremark stock.

The offer has a value of $58.50 per Caremark share (or $26 billion in aggregate), 15 percent more than the Express Scripts closing stock price on Dec. 15. Moreover, the offer also represents a 22% premium over $47.99, which is the average closing stock price of Caremark since November 1, 2006, the day it acknowledged the takeover bid by CVS.

In November, the No. 2 U.S. drugstore chain, CVS announced it entered into an agreement to buy the Nashville, Tennessee-based Caremark in a stock deal worth $21 billion at the time, or $48.48 a share, offering shareholders no premium. The bid valued Caremark at $48.53 a share, 1 percent less than its closing price the previous day.

In a statement, chairman and chief executive officer of Express Scripts, George Paz said, “Together, we will have the size, scale and financial strength to expand the markets we serve. The collective resources of our two organizations will benefit plan sponsors and patients through greater use of cost-effective generic and lower cost brand drugs, specialty pharmacy, home delivery and flexible retail networks.”

Hoping for the world's leading pharmacy benefit manager with the merger, he added, “We look forward to Caremark's careful consideration of our offer and an open dialogue with its Board of Directors to complete this transaction.”

In a letter, Express Scripts sent to the Caremark Board of Directors regarding its offer, George Paz on behalf of the company stated their offer as a "Superior Proposal" as compared to the terms of the CVS/Caremark Merger Agreement.

If the deal gets matured, Caremark stockholders would own approximately 57% of the merged company and Express shareholders 43 percent, Express Scripts stated in the letter.

Express Scripts, which anticipated annual cost savings of $500 million from the deal, hopes the transaction would be completed in the third quarter of 2007.

With the acquisition of Caremark, Express Scripts would not only triple its sales even would gain bargaining power with drugmakers such as Merck & Co. Pharmacy benefit managers that act as a middleman between drugmakers and health insurers, guiding patients about low-cost generics sold by mail and taking millions of customers from drugstores.

After getting the proposal from Express Scripts, Caremark shares rose 9.4 percent to $55.02 in Germany, after closing at $50.30 on Friday in New York.