Express Scripts Inc. will nominate four directors to Caremark Rx Inc.’s board in an effort to push through the $26 billion hostile bid that was rejected Monday by Caremark in favor of a lower offer from CVS Corp.
Express Scripts said it is seeking the seats in light of the Caremark board’s “refusal to even discuss our superior proposal.”
Caremark rejected the Express Scripts bid by saying the deal “would result in a highly leveraged and weakened business” and “insurmountable antitrust risks.”
“We are pleased with the decision of the Caremark board … [and we] look forward to closing our transaction during the first quarter of 2007,” said Tom Ryan, chairman and chief executive of CVS.
Caremark, a manager of prescription benefits for employee health plans, accepted a $21 billion bid Nov. 1 from CVS, the nation’s second-largest drugstore chain, behind Deerfield-based Walgreen Co.
CVS and Express Scripts, which is about a third of Caremark’s size, want Caremark to help them gain clout in negotiating discounts on medicine and to lure customers from rivals such as Wal-Mart Stores Inc. and Medco Health Solutions Inc., the nation’s largest prescription benefits manager.
“Express Scripts has opened up a whole new ballgame,” said Matt Kaufler, a portfolio manager at Clover Capital Management. “They may need to sweeten the bid, and CVS may also need to sweeten their bid.”
Kaufler said Caremark doesn’t have a “poison pill” or shareholder rights provision that would make it difficult for Express Scripts to advance a hostile takeover by purchasing large blocks of Caremark shares.
“Other than the breakup fee with CVS, buying up shares shouldn’t be a problem,” Kaufler said.
St. Louis-based Express Scripts said it will nominate to the Caremark board Stuart Bascomb, chief executive and chairman of Amerisight Inc.; Duke Bristow, an economist who teaches corporate finance at the University of California at Los Angeles; John Jones, a director of Topps Co.; and Todd E. Warnock, founding partner of RoundTable Health Care Partners.
“Since we made our offer for Caremark public, Caremark stockholders and the marketplace as a whole have demonstrated their strong support for our offer,” the Express Scripts statement said. “We clearly provide Caremark stockholders with superior value to the proposed acquisition of Caremark by CVS.”
Earlier in the day, Express Scripts said Caremark was using “antitrust as a red herring to distract stockholders from the real value differential at issue.”
