By AP/KWMU
St. Louis, MO – The prescription drug insurance company Express Scripts is making an effort this morning that could very well make it the St. Louis region's largest corporation.
It's a hostile bid for one of Express's larger competitors, Caremark RX, for $26 billion. The move creates a bidding war because the drug store chain CVS offered to buy Caremark last month for about $21 billion.
Express and Caremark are both in the same business - acting as middlemen between drug companies and employees - while CVS manages drug stores.
Both Express and Caremark rank in the top 200 among Fortune 500 companies (so does CVS). Caremark is based in Nashville, while Express is just a few months from moving into its new headquarters on the campus of UM-St. Louis.
The race to consolidate in the drug industry comes at a time when companies like Express Scripts and Caremark are under pressure to lower prices. Wal-Mart recently announced it would sell some generic drugs for $4.
Express Scripts Inc. proposed to pay $29.25 in cash and 0.426 shares of its stock for each share of Caremark stock. The company said that equals $58.50 per Caremark share, based on Express Scripts' Friday's closing price.
Shares of Caremark rose $4.70, or over 9%, to $55 in early trading Monday, and Express Scripts shares rose $0.50 to $69.16 a share.
Nashville, Tenn.-based Caremark would not comment on the offer, company spokesman Robert Mead said. A spokeswoman for Woonsocket, R.I.-based CVS did not immediately return a message left seeking comment.
CVS Corp., the nation's largest operator of drugstores and second to Walgreen Co. in sales, said on Nov. 1 that it planned to acquire Caremark Rx Inc. for about $21.2 billion in stock.
If the Express Scripts proposal goes through, Caremark stockholders would own approximately 57% of the combined company, and Express Scripts stockholders would own approximately 43%. The combination will create the world's pre-eminent pharmacy benefit management company, Express Scripts said, and allow it cut annual costs of the combined company by about $500 million.
Express Scripts said it has arranged financing from Citigroup's corporate and investment banking units and from Credit Suisse to finance the proposed transaction.
"This opportunity is very compelling as it offers significant value to stockholders, plan sponsors and patients," George Paz, president, CEO and chairman of Express Scripts, said Monday in a statement.
Express Scripts is half the size of Caremark, but the two companies are the third- and second-largest pharmacy benefit management companies.