Caremark-CVS Deal Under Scrutiny

In its initial offer to acquire Caremark Rx (CMX), CVS Corp. (CVS) agreed to substantially boost premiums for insurance that would protect Caremark management and directors from charges of improper backdating of options. The disclosure, made by Caremark in a regulatory filing Feb. 12, bolstered accusations that the company accepted an inadequate takeover bid to get indemnity protection.

The revelation came as Caremark investors who filed suit against the deal persuaded a judge on Feb. 13 to postpone a shareholder vote on the merger later this month, the same day that CVS sweetened its bid for the pharmacy benefits manager by $4 a share, to $60.25, or $25.7 billion. Delaware Chancery Court Judge William Chandler agreed that investors needed more time to consider Caremark's supplemental disclosures made in the previous day's filing. The judge postponed the vote that had been scheduled for Feb. 20 until at least Mar. 9.