Fight brews over bidding for pharmacy

** FILE ** Customers take advantage of the drive through pharmacy window outside a CVS drug store in a Bainbridge Twp., Ohio file photo from Aug. 3, 2006. (AP Photo/Amy Sancetta, File)

WILMINGTON, Del. - Pharmacy benefits manager Express Scripts Inc. is more interested in killing the proposed takeover of rival Caremark Rx Inc. by drugstore chain CVS Corp. than in making a serious competing offer, a Caremark attorney argued in a Delaware court.


Caremark attorney Robert Thornton, hoping to prevent an injunction requested against certain deal protections written into the CVS agreement, pointed to a document provided to the Express Scripts board of directors just before that company launched a hostile counterbid to acquire Caremark. The document, he said, showed that Express Scripts considered killing the CVS deal to be a successful outcome even if its own offer was rejected.

"Their real motives were to derail the CVS transaction and to leave Caremark as a weakened and distracted competitor," Mr. Thornton said, adding that Caremark directors had real concerns about antitrust issues posed by a potential Caremark-Express Scripts merger.

But attorneys representing Express Scripts and two Caremark shareholders argued that Caremark's directors have been misled by their company's management and have failed to adequately educate themselves about the CVS acquisition.

Instead, the board has breached its fiduciary duty to shareholders by blindly accepting the assurances of Caremark managers, keeping shareholders in the dark and allowing the company to be hemmed in by the CVS deal protections, including a $675 million termination fee, they argued.

David McBride, an attorney for Express Scripts, said Caremark's board has been hamstrung from considering a better offer from his client. Mr. McBride said that before Caremark shareholders vote on the proposed CVS deal, they are entitled to know their alternatives.


On Tuesday, CVS offered to triple the cash dividend it would pay to shareholders of Caremark, based in Nashville, Tenn., from $2 to $6.

Express Scripts and the institutional investors are asking to halt the CVS deal, which they contend benefits Caremark executives more than its shareholders.

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

Express Scripts, based in Maryland Heights, Mo., launched its $26 billion bid for Caremark on Dec. 18, but CVS' improved offer is now roughly in line with the value of the Express Scripts bid.

The CVS offer is for stock in the company, and the Express Scripts offer is for stock plus a cash premium to shareholders.

- Associated Press