At long last, the CVS (NYSE: CVS), Caremark Rx (NYSE: CMX), Express Scripts (NASDAQ: ESRX) menage-a-trois has been settled. CVS will acquire Caremark Rx for $26.5 billion. Bidding for Caremark Rx by both Express Scripts and CVS has been going on in public for several months. Due to pressure from Express Scripts, which had sought to acquire Caremark Rx to form a huge pharmacy-benefits management company, CVS will pay a hefty premium after sweetening the deal on three separate occasions to beat back acquisition overtures from Express Scripts. Up to the proverbial last minute, Express Scripts insisted it would meet or exceed any CVS offer if only Caremark Rx would be more forthcoming with company information. According to Dinah Brin of The Wall Street Journal, Express Scripts had offered 0.426 of its own shares plus $29.95 in cash for each Caremark share. It also agreed to a penny per share daily fee during the closing period. Federal antitrust regulators had concerns about this deal, which again opened the door for another offer by CVS.

CVS will pay 1.67 of its own shares plus $7.50 in cash for each Caremark share. CVS shareholders will own 54.5% of the new company, while Caremark Rx shareholders will own 45.5 %. CVS had argued in print that the Express Scripts' proposal would create a company that was so highly leveraged it would rate a "junk" credit rating. Also, the combined Express Scripts-Caremark company would be many times larger than any deal Express Scripts had previously negotiated. It would be very difficult for Express Scripts to integrate Caremark into a combined company.

Express Scripts management had argued that both Express Scripts and Caremark are pharmacy-benefits management companies, whereas CVS is a drug retailer trying to acquire a pharmacy-benefits company it does not understand and will not know how to run.

CVS and Caremark management estimated half a billion dollars in cost savings annually from the combined company, with annual revenues closing in on close to $1 billion by some optimistic estimates. The combined company hopes to use its size to increase bargaining power against Walgreen Company (NYSE: WAG), Wal-Mart Stores, Inc. (NYSE: WMT) and Medco Health Solutions, Inc. (NYSE: MHS), the nation's largest pharmacy-benefits management company.