Express Scripts, Snubbed by Caremark Rebuff, Launches Proxy War

Snubbed by Caremark's brazen refusal to consider its takeover bid thereby derailing rival CVS's bid, Express Scripts has launched a proxy war, saying it would nominate four directors to Caremark's 11-member board. Caremark responded that the vote would require approval at its annual meeting, normally held in May. Express Scripts' $26 billion bid is 13% higher than CVS's, but Caremark said in a statement yesterday that the offer created significant antitrust risks. Express Scripts called the risks a "red herring" that Caremark was using to distract shareholders. Express Scripts has already begun the Federal Trade Commission review process, and is trying to speed things up by sending its lawyers to begin arguing its case. Healthcare analyst Kemp Dolliver says most people think it will get FTC approval, although it may take time. In a press release yesterday, Express Scripts and Caremark each said it could achieve $500 million in savings by cutting costs. Shares of Caremark were up $0.29 to $56.64 yesterday, well above the CVS cash-and-stock offer which was worth $52.35 at yesterday’s CVS price. Sheryl Skolnick, a health care analyst with CRT Capital said investors seem to be saying a higher bid's worth waiting for, despite antitrust uncertainties. But A.G. Edwards & Sons analyst Andrew L. Speller said, "I would be very surprised if Express Scripts and Caremark ever get together."

• Sources: Press Releases: Express Scripts (I, II, III), CVS, Caremark, New York Times
• Related commentary: CVS to Acquire Caremark Rx for $21 Billion, Express Scripts Undercuts CVS in Brazen Bid For Rival Caremark Rx, Caremark Favors CVS Offer Over Express Scripts , Shares Say Traders Expect More, How the CVS-Caremark Merger Might Work (Or Not), Is CVS the Prescription Fix for Caremark?
• Potentially impacted stocks and ETFs: Caremark Rx Inc. (CMX), CVS Corp. (CVS), Express Scripts Inc. (ESRX). Competitors: Wal-Mart Stores Inc. (WMT), Medco Health Solutions (MHS), Wellpoint, Inc. (WLP). ETFs: Retail HOLDRs (RTH), SPDR Retail (XRT), PowerShares Dynamic Pharmaceuticals (PJP), iShares Dow Jones US Pharmaceuticals (IHE), SPDR Pharmaceuticals ETF (XPH)

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