February 15, 2007
Delaware Chancery Court Halts Caremark Vote
The Delaware Chancery Court has ordered that Caremark postpone its vote to approve a merger transaction with CVS. Another bidder, Express Scrips, had offered a higher bid. After the court decision, CVS increased its offer. The Court held that Caremark had not given shareholders enough information on the competing bids. Three proxy advisory firms, including ISS, had recommended that Caremark shareholder vote down the merger. The negative recommendations were based on the Caremark board's bias in the bidding for the CVS offer and hostility towards the Express Scrips offer. The advisory firms believed that Caremark could sell for more in a continuing auction. Express Scrips is waiting on an FTC decision on whether to issue a "second request" under Hart-Scott-Rodino for more information on potential antitrust problems in its propose acquisition of Caremark. The Court's intervention before the vote is unusual, particularly in light of the proxy advisory firm negative recommendations. In any event, it appears that the Delaware Chancery Court is willing to assume a role of referee in contested acquisitions and will blow the whistle on acts of the target that favor to much one side over the other.
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