March 8 (Bloomberg) -- CVS Corp., vying with Express Scripts Inc. to buy Caremark RX Inc., made its ``best and final offer'' for the employee-benefits manager a day after Express Scripts sweetened its bid.

CVS, the second-biggest U.S. drugstore chain, increased its bid by 2.5 percent to $26.3 billion, equaling Express Scripts' offer. Nashville, Tennessee-based Caremark said in a statement today that its board approved CVS's proposal.

The winner of the fight for Caremark, the second-largest U.S. manager of employee drug benefits, gains clout in negotiating discounts from drugmakers. CVS says its bid is superior because it has cleared antitrust hurdles while Express Script's merger with Caremark may not be allowed.

``CVS is clearly in the driver's seat,'' said Tom Burnett, director of research at Wall Street Access in New York. For Caremark investors, ``this is going to be the best alternative.''

CVS increased the dividend it would pay Caremark shareholders by $1.50, bringing the total offer to $61.62 a share in cash and stock. CVS also said today it will buy back 150 million of its own shares for $35 each after the purchase is complete.

Express Scripts, based in St. Louis, is the third-largest U.S. drug-benefit manager. The company yesterday said it would pay an extra half a cent a day for each Caremark share, starting April 1. That may make its offer as much as $62.50 a share.

Shares Gain

CVS shares rose $1.09 to $32.41 at 4:18 p.m. in New York Stock Exchange composite trading. Stock in Nashville, Tennessee- based Caremark rose 86 cents to $62.16. Express Scripts shares advanced $1.23 to $76 on the Nasdaq Stock Market.

CVS's offer ``was a significant improvement,'' said Stuart Grant, a Wilmington, Delaware-based lawyer who represents the Louisiana Municipal Police Employees' Retirement System, a Caremark investor.

Express Scripts spokesman Steve Littlejohn declined to comment on the new CVS offer.

Caremark shareholders are scheduled to vote on the offer March 16 and CVS investors will vote on March 15. Yesterday, a Delaware judge denied a motion to delay the Caremark vote.

Kemp Dolliver, a Boston-based analyst with Cowen & Co., said Caremark investors may seek a delay in the meeting, arguing they don't have enough time to consider the CVS offer made today. That ``could open the door to an additional delay in the meetings,'' he said in a note to clients.

November Beginning

CVS first agreed to buy Caremark in November. It raised its offer in January and then again last month to help stave off Express Scripts' hostile bid. CVS received antitrust clearance for its merger proposal on Dec. 20.

CVS's current offer is 27 percent more than the $48.53 a share bid it made on Nov. 1.

Standard & Poor's Inc. said today that it may cut CVS's credit rating, saying the additional cash the company would pay to acquire Caremark may reduce its creditworthiness.

CVS and Express Scripts want Caremark to help them lure customers from Wal-Mart Stores Inc. and Medco Health Solutions Inc., the biggest benefits manager.

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net

Last Updated: March 8, 2007 17:51 EST