Express Scripts is moving ahead with its $25 billion plan to take over rival PBM Caremark Rx, announcing Tuesday that it has begun offering cash and shares to Caremark shareholders, despite being rebuffed by the Caremark board last week. That move follows a lawsuit by a large institutional investor that charges Caremark insiders with putting personal enrichment ahead of shareholder value. In a suit filed last month but not reported until Friday, the Louisiana Municipal Police Employees Retirement System, said the PBM's board members ignored the Express Scripts offer in order to protect executive jobs and perks in a proposed merger with CVS.
Although the $21.2 billion CVS merger proposal is worth significantly less than the Express Scripts bid, a $675 million breakup fee effectively prevents Caremark from pulling out of the CVS deal, the suit says. "Our main gripe is this was a sweetheart deal that gave the insiders a lot more than the outsiders," the pension board's attorney, Stuart Grant told the Associated Press. Among other allegations, Grant said that Caremark boss Edwin "Mac" Crawford personally would receive $48 million in stock, severance pay and consulting fees from the merger, which would make him chairman of the combined company. Also, Crawford's son has been promised a job if the CVS deal goes through, the AP reports.