Delaware Court of Chancery Delays Vote on CVS/Caremark Merger

John F. Grossbauer, Michael K. Reilly, Roxanne L. Houtman

In a decision that emphasizes the need for attention to all the circumstances surrounding the structuring of deals, the Delaware Court of Chancery issued a preliminary injunction postponing for at least 20 days a vote of the stockholders of Caremark RX, Inc. (“Caremark”) on its proposed merger with CVS Corporation (“CVS”).[2]  Although the mere postponement of the vote appears to be unremarkable, the Court’s decision merits attention because of the primary reason for the injunction: The Court treated a special dividend and a stock for stock merger as an integrated transaction and concluded that the Caremark stockholders were entitled to appraisal rights.  In addition, the Court made interesting observations about termination fees and the structure of investment advisors’ fees.

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