The battle for Caremark continues

Express Scripts Inc (NASDAQ: ESRX) upped its offer for Caremark RX Inc (NYSE: CMX) last night. Express, a pure pharmaceutical benefits management company, or PBM, is in a battle with CVS Corporation (NYSE: CVS), the pharmacy chain, over Caremark.

Express supposedly raised its offer over concerns that it will soon receive a second request from regulators. This would most likely mean the deal would not close for another six to nine months. CVS and Caremark have already received regulatory approval with the shareholder vote coming in a few weeks.

This is a bizarre transaction in that a PBM like Caremark has never merged with a pharmacy chain like a CVS. Shareholders believe Caremark management and board is acting in their own best interests rather than the interest of shareholders. Actually, there are few sell-side analysts or shareholders who know the industry well who actually see the business merits of the two companies merging.

Meanwhile, as this battle unfolds, it appears the fundamentals for this industry are improving. Medco and Express both reported very strong results and guided to strong results.

Express' management is very well-respected and most believe would do a very good job working with Caremark. The battle is set for the shareholders' meeting set in the next few weeks. We will see if Express increases their offer again prior to the shareholder meeting.