CVS Caremark encouraged to split
There’s been a fair amount of reporting about the inherent conflict of interest that comes with a pharmacy retail chain owning a pharmacy management company. Independent pharmacists have complained that Woonsocket based CVS Caremark steers their customers towards CVS retailers and away from their stores. There’s even an ongoing Federal Trade Commission investigation into improper business practices since CVS and Caremark merged in 2007.
But this time, the folks calling for CVS and Caremark to split aren’t regulators or independent pharmacists, they’re shareholders. According to an article in Bloomberg, SunAmerica Asset Management Corp, and Cambiar Investors, both major shareholders (Cambiar oversees 8 billion dollars stock and owns 3.8 billion shares) are concerned about CVS Caremark’s under performing stock, and believe it’s worth more if the entities break up. From Bloomberg-
“They’re under the gun and need to turn this around,” said Maria Mendelsberg, a money manager at Denver-based Cambiar Investors, which oversees $8 billion and owns about 3.8 million shares of CVS Caremark. “They’re at a crossroads. People are just losing their patience. If they were separate, the combination would be worth more than where the stock is today.”
Bloomberg says the shares could be worth $25 billion more following a break up. But CVS Caremark says that’s not an option. Again, from Bloomberg-
“There are no plans to split up the company,” Carolyn Castel, a spokeswoman at Woonsocket, Rhode Island-based CVS Caremark, said in an e-mail. “We are uniquely positioned to continue to develop and implement programs that meet our goals and enhance shareholder value.”
CVS Caremark has not responded to my request for comment. I’m also working on talking directly with Maria Mendelsberg from Cambiar.