Battle for Caremark takes another turn

Yesterday, a Delaware state court in a suit by a Louisiana municipal police retirement fund ordered prescription benefit manager Caremark to delay its shareholder vote on the CVS merger proposal at least until March 9. That date is the Federal Trade Commission’s current deadline for issuing a Hart-Scott-Rodino Act pre=merger decision on whether or not the Express Scripts merger proposal is acceptable from an anti-trust law standpoint. (The essentially vertical CVS merger proposal already has cleared that hurdle, but the horizontal Express Scripts merger obviously raises greater antitrust issues.) The court reasoned that Caremark shareholders need more time to evaluate the merger proposals. According to press reports, the Delaware court was puzzled by the fact that the Caremark board has not negotiated with Express Scripts or solicited other offers.

Caremark publicly announced continuing support for the CVS deal and that it “will inform shareholders as promptly as possible regarding the new date of the special meeting to approve the CVS merger.” Express Scripts was pleased with the decision.

In wake of four major independent proxy advisory firms advising against the CVS merger proposal, CVS yesterday increased its special Caremark merger closing dividend from $2 to $6 per Caremark share. CVS also postponed its February 23 shareholder meeting on the Caremark merger proposal.

The Wall Street Journal reports today that “at the close of trading yesterday [and the increased CVS dividend was considered], the CVS deal was worth $59.53 for each Caremark share, while Express’s cash-and-stock offer was valued at $61.37. In 4 p.m. New York Stock Exchange composite trading, Caremark traded higher than both offers, at $62.88, up $1.97.”