Pharmacy Chain CVS To Purchase PBM Caremark Rx for $21.3B in Stock
Rhode Island-based pharmacy chain CVS on Wednesday announced plans to acquire Tennessee-based pharmacy benefit manager Caremark Rx for about $21.3 billion in stock, the Philadelphia Inquirer reports.
Under the acquisition, Caremark shareholders would receive 1.67 shares of CVS stock for each Caremark share. CVS shareholders would own 54.5% of the combined company -- CVS/Caremark -- and Caremark shareholders would own 45.5% (Philadelphia Inquirer, 11/2).
According to the Wall Street Journal, the acquisition would "create a behemoth controlling the dispensing of one billion prescriptions a year -- more than a quarter of the U.S. total" (Armstrong/Martinez, Wall Street Journal, 11/2).
CVS and Caremark will have combined revenue of about $75 billion in 2006, the companies said (Johnson, AP/Memphis Commercial Appeal, 11/2). CVS and Caremark said that the acquisition would provide $400 million in "operating synergies" through increased purchasing power and other cost savings (Wall Street Journal, 11/2).
CVS Chair and CEO Thomas Ryan would become CEO of CVS/Caremark, and Caremark Chair and CEO Edwin Crawford would become chair of the combined company (Krasner, Boston Globe, 11/2). CVS/Caremark would have headquarters in Rhode Island, but the PBM business of the combined company would remain in Tennessee (AP/Memphis Commercial-Appeal, 11/2).
The acquisition requires approval from shareholders, as well as state and federal regulators (Fineman/Lauerman, Bloomberg/St. Louis Post-Dispatch, 11/2).
The acquisition likely will receive a "tough review" by the Federal Trade Commission and might "face forced changes or divestitures if the agency finds antitrust problems," the Journal reports.
CVS and Caremark expect the acquisition to close in six months to one year (Wall Street Journal, 11/2).
Several broadcast programs reported on the acquisition:
- APM's "Marketplace": The segment includes comments from Mark Husson, a pharmaceutical industry analyst for HSBC, and Stuart Schweitzer, associate director of the Research Program in Pharmaceutical Economics and Policy (Scott, "Marketplace," APM, 11/1). The complete transcript and audio of the segment are available online.
- NPR's "Morning Edition": The segment includes comments from Meredith Rosenthal, an assistant professor at the Harvard School of Public Health, and Ryan (Horsley, "Morning Edition," NPR, 11/2). Audio of the segment is available online.
- PBS' "Nightly Business Report": The segment includes comments from Husson (Gharib, "Nightly Business Report," PBS, 11/1). The complete transcript of the segment is available online.