Caremark's AdvancePCS tender expires as companies complete merger

New York, March 24 - Caremark Rx, Inc. (Ba2/BBB-) said that it completed its previously announced merger with AdvancePCS (Ba2/BB), having satisfied all required closing conditions. Caremark simultaneously announced the expiration of its previously announced tender offer to buy for cash any and all of AdvancePCS' outstanding 8½% senior notes due 2008.

The tender offer expired as scheduled at 9 a.m. ET Wednesday without further extension. As of that deadline, holders had tendered $183.825 million of the notes, or about 98% of the outstanding principal amount.

As a result of having previously received the consent of holders representing at least a majority of the outstanding principal amount of the notes, AdvancePCS, certain of its subsidiaries and the notes' indenture trustee executed a supplemental indenture which, among other things, removed certain restrictive covenants, and events of defaults under the indenture.

As previously announced, Caremark Rx, a Nashville-based pharmacy prescription benefit management company, said on Feb. 18 that it had begun a tender offer to purchase for cash any and all of the outstanding 8½% notes of AdvancePCS, an Irving, Tex.-based competitor.

It said the tender offer was being carried out through Caremark's wholly owned subsidiary, Cougar Merger Corp, which also began soliciting AdvancePCS noteholder consents to eliminate most of the restrictive covenants from the indenture under which Advance PCS issued $200 million of the notes in March 2001.

Under the terms of the transaction as envisioned, AdvancePCS would be merged with and into Cougar Merger Corp., with AdvancePCS surviving the merger and becoming a wholly owned subsidiary of Caremark.

Caremark said the purchase price to be paid for tendered notes would be set according to a formula based on the present value of the redemption price of $1,042.50 per $1,000 principal amount on the first call date April 1, 2005, discounted at 50 basis points over the yield on the reference security, the 1.625% U.S. Treasury note due March 31, 2005. It said that holders tendering their notes by the consent deadline and thus consenting to the proposed indenture changes would receive a consent payment of $20 per $1,000 principal amount of notes as part of their total consideration.

Holders tendering their notes after the consent deadline would be paid the tender price as determined by the company, but would not receive the consent payment.

On March 22, Caremark set the pricing for the tender offer, saying that it would pay $1,110.96 per $1,000 principal amount for notes tendered by the consent deadline and $1,090.96 for notes tendered after that, with both payments based on an assumed payment date of March 24.

The company said that holders tendering notes would be required to consent to the proposed amendments to the indenture.

Caremark said that among other conditions, the tender offer and consent solicitation would be subject to the successful completion of the proposed merger between Caremark and AdvancePCS, which has now been fulfilled.

On March 15, Caremark said that as of 5 p.m. ET on March 12, holders of some 97.87% principal amount of the outstanding 8½% notes had validly tendered them and delivered their consents.

It also announced the extension of the offer expiration date to 9 a.m. ET on March 23, subject to possible further extension, from the originally announced deadline at 9 a.m. ET on March 17. The deadline was subsequently extended again to March 24.

UBS Investment Bank was dealer manager (contact Liability Management Group collect at 203 719-4210 or at 888 722-9555 x 4210). Georgeson Shareholder Communications Inc. was the information agent (collect at 212 440-9800 or at 866 399-8771. The Bank of New York Trust Co. NA was the depositary.

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