NASHVILLE, Tenn. (AP) -- Executives of drugstore chain CVS Corp. and prescription benefits manager Caremark Rx Inc. say they will be able to save $400 million a year by combining the companies.þþCVS' all-stock buyout offer for Caremark, a deal valued at $21.2 billion when it was announced Nov. 1, left some analysts wondering what the two companies have to offer each other.þþBut the combined company to be called CVS/Caremark Corp. will be able to start saving the $400 million annually starting at the end of 2008, Howard A. McLure, Caremark's senior vice president and chief operating officer, said Wednesday. The buyout is still contingent on approval from shareholders and regulators.þþThese are savings that ''I don't think you could obtain through a joint venture,'' McLure said at Merrill Lynch investor conference in New York. ''These are mainly product acquisition costs, which I think you've got to have the transaction in order to get.''þþDave Rickard, chief financial officer at CVS, declined to elaborate on specifics about where the companies will find those savings.þþ''Purchasing is the majority of it, and the purchasing synergies are expected to be nearly immediate,'' he said. ''There is some operational efficiency cost reduction, and there is some overhead cost reduction. There are no revenue synergies within that $400 million number.''þþRickard is slated to remain CFO with the combined company that will be based in Woonsocket, R.I. McLure will run the pharmacy benefits management services division out of Nashville.þþRickard explained that Caremark's mail-order expertise will help improve service at pharmacies when they are busiest -- the same time when they are most profitable.þþ''At the most successful point in the (pharmacy's) history, it's at risk of not serving well -- of being overloaded and simply not meeting commitments and not getting prescriptions out in a reasonable time,'' he said.þþ''If we can catch the business before it reaches that critical point and offload some to mail order, we can optimize that store,'' Rickard said. ''If you think about that across 6,000 stores, that could be a fairly important feature.''þþMcLure said the combination is not designed to protect against retailers like Wal-Mart Stores Inc. that are introducing programs to sell generic drugs for as little as $4.þþ''It was very much an offensive perspective ... ,'' McLure said of speculation that the deal was inspired by Wal-Mart. ''We didn't do it because of Wal-Mart.''þþUnder the deal, CVS shareholders will own 54.5 percent of the combined company and Caremark shareholders will own 45.5 percent.þþNashville-based Caremark buys drugs from pharmaceutical companies directly and then distributes them through its national network of about 60,000 pharmacies and seven mail-order offices. It provides services for over 2,000 corporate, insurance, managed care, government, and union health plans.þþ
Source: NY Times
