Jan. 16 (Bloomberg) -- Express Scripts Inc. began a hostile tender offer for all outstanding shares of Caremark Rx Inc., seeking shareholder support for its $24.3 billion takeover bid over a smaller offer from CVS Corp.

Express Scripts offered Caremark stockholders $29.25 in cash and 0.426 share of Express Scripts stock for each share of Caremark, Express Scripts said today in a statement. Based on closing prices from Jan. 12, the offer has a value of $56.87 a share. CVS, the second-largest U.S. drugstore chain, offered $48.53 a share on Nov. 1., or $22.3 billion.

Express Scripts' unsolicited offer was rejected last week by Caremark's board. Buying Caremark would make Express Scripts, based in Maryland Heights, Missouri, the largest manager of drug benefits in the U.S. CVS, based in Woonsocket, Rhode Island, wants Caremark to help give it more bargaining power in negotiating the price of medicines.

``There is nothing new in this Express Scripts offer and nothing unexpected,'' Caremark spokeswoman Nina Devlin said in a telephone interview today. ``We remain committed to our merger agreement with CVS.'' Caremark said Jan. 8 that an alliance with Express Scripts ``would result in a highly leveraged and weakened business.''

Shares of Express Scripts rose 88 cents, or 1.4 percent, to $65.71 at 4:00 p.m. New York time in Nasdaq Stock Market composite trading. Caremark fell 58 cents, or 1 percent, to $56.25 in New York Stock Exchange composite trading, while CVS slipped 15 cents to $31.79.

`Numerous Times'

Express Scripts has spoken with Caremark ``numerous times over the past four years'' about a possible alliance, said George Paz, Express Scripts' chief executive officer, during a conference call with investors today.

``Our offer delivers superior value,'' Paz said. ``It's fully financed and the regulatory process is well under way.''

Between Feb. 2001 and mid-2005, Caremark and Express Scripts had ``several series of discussions and meetings concerning potential strategic transactions, including the acquisition of Caremark by Express Scripts and the acquisition of Express Scripts by Caremark,'' Express Scripts said today in a regulatory filing.

Express Scripts on Jan. 3 asked U.S. antitrust regulators to approve both its proposed tender offer and its takeover bid, the company said in the filing. The deadline for the U.S. Federal Trade Commission to review these proposals is midnight Feb. 2, unless regulators extend the waiting period by seeking additional information, Express Scripts said.

Lose Contracts

Caremark may lose contracts that would generate more than $8 billion in revenue because of a threatened proxy fight, Caremark Chief Executive Officer Mac Crawford said Jan. 10 at a meeting with investors in San Francisco.

Uncertainty generated by the Express Scripts Caremark's ability to sign new contracts for managing drug benefits, Crawford said. Caremark has said a combination with CVS could lower costs by $400 million.

``We are already being shut out by decision makers'' because of the possibility that Express Scripts may take over Caremark, Crawford said. ``They like us and our pricing, but they can't take the risk that we won't be in charge.''

Crawford accused Express Scripts of setting out to disrupt Caremark's planned combination with CVS and of making an estimate of $500 million in savings that was ``plucked entirely out of the air.''

`Committed'

CVS spokeswoman Eileen Howard Dunn said in a telephone interview today that the company ``remains committed to closing its merger with Caremark in the first quarter of 2007.''

Express Scripts said at a Jan. 8 meeting with investors in San Francisco it expected its takeover of Caremark to be completed by the end of the third quarter of 2007. Express Scripts said it started the tender offer ``in light of the Caremark board's rejection of and refusal to even discuss our superior proposal.''

The company sued Caremark on Jan. 10 in Delaware Chancery Court in Wilmington, asking a judge to rule that a $675 million breakup fee if the CVS deal fails is ``unreasonable, unlawful and invalid.''

``Express Scripts shares are likely to be volatile over the next few months as investors determine whether Caremark will be acquired by CVS or Express Scripts,'' said Matt Perry, an analyst with Wachovia Capital Markets LLC in New York, in a Jan. 12 note.

Caremark said Jan. 8 in a regulatory filing that it couldn't ``envision any scenario where it would be willing to trigger the imposition of a $675 million breakup fee without having the competing party obligated to fund the payment.''

Paz today said Caremark was interpreting that fee as ``a speaking fee'' and as ``the price of admission just for having a conversation'' about a possible alliance.

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

Last Updated: January 16, 2007 16:35 EST