Yesterday, a Delaware state court judge refused to block a vote on the CVS – Caremark merger proposal although he did require Caremark to notify shareholders of their rights to vote no or ask a Delaware court to appraise the CVS proposal. Businessweek observed that the court’s “determination that Caremark shareholders are due appraisal rights means they can seek court intervention if they don’t think they’re getting fair value for their holdings. The result, [plaintiff’s attorney] Grant said, is that CVS will be pressured to match Express Scripts in making an attractive offer.”
This morning, Caremark issued the required notice to its shareholders and set March 16 as the date for a shareholder meeting and vote on the CVS merger proposal. Express Scripts, the other competitor in the Battle for Caremark, again offered to sit down with Caremark to discuss its proposal.
Snow said in an interview that Medco, which handles prescriptions for 60 million Americans, should benefit whoever acquires the industry’s No. 2 — Caremark Rx Inc. It is weighing competing bids from another rival, Express Scripts Inc., and drugstore chain CVS Corp. Other pharmacy chains wanting to partner with a neutral prescription benefit manager now are negotiating attractive deals with Medco, Snow said, adding some current Caremark clients may defect. Should Express Scripts win out, he said, the combination would be bigger than Medco. But Snow said Caremark’s customer service has been suffering since it acquired AdvancePCS in 2004. CVS has been telling Caremark shareholders that a Caremark-Express Scripts deal would likely cost the merged company $8 billion in annual revenue from dissatisfied customers bailing out. Speller said Medco can grab those “crumbs” and if the battle is prolonged, will be “in the catbird seat” for picking up business from plans wanting to avoid uncertainty at Caremark and Express Scripts.