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CVS Caremark encouraged to split

April 8, 2011

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.

2 Comments leave one →
  1. April 8, 2011 10:07 pm

    See my article on why the CVS-Caremark merger was pro-competitive and why a horizontal merger between Caremark and Express Scripts (or Medco) for that matter would be anti-competitive. The FTC would never let ESRX or MHS buy Caremark.

    What is good for Wall Street is not necessarily good for the consumer. Any split up of CVS and Caremark would reduce consumer welfare.

    See my article on website “The CVS-Caremark Merger and the Coming Preferred Provider War”

  2. JFerreira permalink
    April 9, 2011 3:33 pm

    Hmm, methinks the soon-to-exit CEO Thomas Ryan is beating a hasty retreat because there’s something rotten in the corridors of pharmacy power in Woonsocket. Just what RI needs right now, a corporate example of this rotten state’s additction to corruption at every level, from greasing the skids to get a pothole filled on your street to safeguarding tax exemptions for the politically connected to guaranteeing pay increases to legislative aides who have never been worth the money in a state as small as this. Enough is enough. No WONDER the rotten Tea Party get’s the ear of the easily persuaded. Imagine what they’ll do if they ever gain traction here…

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