March 16 (Bloomberg) -- Shareholders of Caremark Rx Inc., the target of a three-month bidding contest, may approve a $27 billion buyout by drugstore chain CVS Corp., whose holders backed the deal yesterday.

Rival bidder Express Scripts Inc. declined to raise its $27.5 billion offer this week after owners of no more than 1.4 percent of Caremark tendered their shares. U.S. antitrust regulators delayed approval of the Express Scripts bid earlier this month, giving an edge to CVS, which already won clearance.

``The odds are in favor of Caremark shareholders approving the CVS deal,'' said Matt Kaufler, who manages $2.6 billion including CVS shares, for Clover Capital Management in Rochester, New York, in a telephone interview yesterday. ``CVS offered no premium at the start of this bidding war, but now that the gap between the two offers has narrowed, Caremark investors will be focused more seriously on the fact that Express Scripts doesn't have antitrust clearance and CVS does.''

CVS, the second-biggest U.S. pharmacy chain, and Express Scripts both want Caremark to gain clout in negotiating lower prices from drugmakers. CVS needs Caremark, the No. 2 U.S. manager of drug benefits for employer health plans, to help lure more customers into stores. Buying its larger competitor would make Express Scripts the biggest drug-benefits company.

Shares of all three companies jumped after CVS holders endorsed the proposed transaction. Caremark, based in Nashville, Tennessee, rose $1.67, or 2.7 percent, to $62.75 yesterday in New York Stock Exchange composite trading. CVS, based in Woonsocket, Rhode Island, increased $1.03, or 3.2 percent, to $33.34. CVS ranks behind Walgreen Co. among U.S. drugstore operators.

Express Scripts, based in St. Louis, climbed $1.31, or 1.6 percent, to $82.41 in Nasdaq Stock Market composite trading. Caremark and Express Scripts rank behind Medco Health Solutions Inc. in managing pharmacy benefit programs.

Nashville Meeting

Caremark shareholders meet to vote today at 8:30 a.m. local time in Nashville. The vote results may be announced several hours later because many investors waited until the last minute to take a position on the deal, analysts said.

``It would not be prudent to say the merger is a lock, but we believe there is a good chance the deal becomes finalized,'' said Patricia Baker, an analyst with Merrill Lynch, in a note to investors yesterday.

CVS is offering 1.67 of its shares and a $7.50 special dividend for each share of Caremark. CVS said it expects to complete the purchase this month.

Express Scripts bid $29.25 in cash and 0.426 of an Express Scripts share for each Caremark share. The company also said it will pay about a half-cent a share for each day it takes to complete the deal after April 1. Express Scripts said earlier this month it could close its transaction by September.

Vote May Be Close

The vote today may be close because investors must weigh the CVS offer against the possibility that Express Scripts or another bidder might pay more if Caremark considers negotiating for a better deal, said Brishen Rogers, an attorney with CtW Investment Group, which advises unions on shareholder issues. CtW recommended that Caremark holders reject the CVS combination.

``Caremark has refused to consider any offer other than the deal they struck with CVS, a flawed process that from the beginning created the potential for Caremark not to get the highest possible bid,'' Rogers said.

After the CVS vote yesterday, Express Scripts said it remains ``firmly committed'' to raising the cash portion of its offer if Caremark agrees to open its books and permit Express Scripts to evaluate how much in savings might be generated after a combination.

``We're absolutely committed to increasing our offer if we are able to identify more than $500 million in synergies through confirmatory due diligence,'' Express Scripts said in a statement.

Shareholder Advisers Split

CVS said holders of 91.8 percent of its stock backed the Caremark acquisition. Shareholders also approved a plan to change the company's name to CVS/Caremark, pending the outcome of the Caremark vote.

Institutional Shareholder Services Inc., the largest firm advising investors, said this week that Caremark shareholders should vote for the CVS offer, after initially opposing the deal.

Other advisers, including Glass Lewis & Co., Proxy Governance and CtW, recommended that Caremark investors reject the transaction.

The California Public Employees Retirement System, owner of 2.1 million Caremark shares and 3.1 million CVS shares, voted against the combination, said Clark McKinley, a spokesman for the pension fund, in an e-mailed statement.

``The merged company would have less value to shareholders than the separate companies before a merger,'' McKinley said. ``Similar deals in the pharmaceutical industry have eroded value.''

Pitching to Investors

In the days leading up to the votes yesterday and today, Express Scripts and CVS made their pitches to shareholders through press releases and full-page newspaper ads.

Caremark called the Express Scripts bid a ``highly conditional, highly leveraged proposal that cannot be completed for many months.''

Express Scripts argued that ``by refusing to talk to Express Scripts, the Caremark board continues to waste opportunities to obtain the highest value for Caremark stockholders.''

To contact the reporter on this story: Lisa Rapaport in New York at Lrapaport1@bloomberg.net.

Last Updated: March 16, 2007 00:08 EDT