CVS Ups the Ante for Caremark Rx; Judge Delays Vote

CVS Corp. has raised its offer for pharmacy benefits manager Caremark Rx to $25.4 billion to fend off a rival bid by Express Scripts Inc. This is the second time CVS has raised its bid. Caremark's shares rose over 3% on the news. CVS has increased its offer by $4 a share to $60.26 by tripling a dividend payable to Caremark's shareholders, bringing it into line with Express Scripts's $61.08 per share offer. Caremark and CVS agreed to merge last November, but Express Scripts presented Caremark's shareholders with a higher offer a month later, setting off a bitter bidding war. In related news, a Delaware judge has ordered Caremark to postpone its shareholder vote on the CVS offer from next week till next month. The ruling, which was not expected, is the product of a shareholder lawsuit that contested the fairness of the CVS-Caremark deal. The Caremark board has consistently refused to discuss any offers from Express Scripts, which has postponed announcing any new bids until closer to the rescheduled meeting. Caremark shares closed yesterday at $62.88, above both offers.

Sources: New York Times, Bloomberg, MSN.com
Commentary: Don't Expect Express Scripts to Bow Out of Caremark Rx Bidding • Express Scripts Begins $25 Billion Hostile Bid for Caremark; CVS Sweetens Deal • Is CVS' Bid the Fix Caremark Investors Need?
Stocks/ETFs to watch: CVS Corp. (CVS), Caremark Rx, Inc. (CMX), Express Scripts Inc. (ESRX). Competitors: Medco Health Solutions Inc. (MHS), Rite Aid Corp. (RAD), Walgreen Co. (WAG). ETFs: iShares Dow Jones US Healthcare Provider (IHF), Rydex S&P 500 Pure Growth (RPG), Rydex S&P Equal Weight (RSP), Retail HOLDRs (RTH), Consumer Staples Select Sector SPDR (XLP), Vanguard Consumer Staples ETF (VDC), SPDR S&P Retail (XRT), Pharmaceutical HOLDRs (PPH)

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