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Caremark investors urged to reject buyout

February 13, 2007|From the Associated Press

Two more investment advisory firms recommended Monday that shareholders of Caremark Rx Inc. reject a buyout offer from the drugstore operator CVS Corp. when it comes up for a vote next week.

CtW Investment Group and Institutional Shareholder Services Inc. joined two other advisors who said Nashville-based Caremark's board and managers had not tried to get the best deal for shareholders.

CtW held a forum Feb. 2 where institutional shareholders with about 46% of Caremark's stock heard from the chief executives of CVS and Express Scripts Inc., which has launched a rival bid for Caremark.

"Given the inadequate value and uncertain benefits of the CVS merger as proposed and the Caremark board's stunning failure to engage in a negotiating process that would maximize shareholder value, we urge you to vote the company's white proxy card against Proposal No. 1 to approve the CVS merger," the CtW letter to shareholders said.

New York-based CtW works with public and union-sponsored pension funds representing an estimated 18.7 million Caremark shares.

Rockville, Md.-based Institutional Shareholder Services, which advises mutual funds, pension plans and other institutional shareholders, also urged rejection of the CVS offer.

"We conclude that the process was flawed to such a degree that we cannot recommend that [Caremark] shareholders support the transaction as currently constructed," ISS wrote in its analysis.

Glass, Lewis & Co. and Egan-Jones, a pair of investor advisory firms, previously had advised Caremark shareholders to vote against the CVS offer.

Woonsocket, R.I.-based CVS said Nov. 1 that it planned to acquire Caremark for CVS stock in a deal worth more than $24 billion. That proposed deal has already won antitrust approval.

Express Scripts of Maryland Heights, Mo., announced a hostile bid for Caremark on Dec. 18. That offer is now worth about $26 billion and would unite the No. 2 and No. 3 pharmacy benefits managers.

Caremark shareholders are scheduled to meet Feb. 20 to consider the CVS deal, and CVS shareholders are to meet three days later.

CtW didn't endorse the Express Scripts bid and said it had "significant concerns" with that proposal as well. CtW hopes rejection of the CVS offer would prompt new bids for Caremark.

Shares of Caremark fell 41 cents to $60.91 and CVS fell 42 cents to $32.49. Express Scripts shares rose $1.42 to $74.73.

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