The proposed tie-up of retail pharmacy chain CVS and Caremark Rx, the drug benefits manager, is billed as a merger of equals. A cynic might wonder whether CVS is saying that to avoid paying a premium for Caremark. CVS shareholders will own about 55 per cent of the combined group if the all-stock deal goes ahead. Tom Ryan, the CVS chief executive, will head the executive team at CVS/Caremark, which will be headquartered in CVS’s Rhode Island home town. A chairman from Caremark and an even split of board seats seem like window-dressing.

In its favour, the deal has the potential to lead the way in exploiting rapid changes in the US healthcare industry. CVS and Caremark are both big prescription drugs buyers. The combination would give them extra clout when buying from drug makers. That would help balance pressure to charge patients less. CVS’s retail outlets should complement rather than compete with Caremark’s growing mail order business. The new group might also be better placed to combat Wal-Mart’s recent initiative to sell generic drugs cheaply.

The companies expect $400m a year in cost synergies, enough to add more than 5 per cent to the combined valuation of about $45bn, assuming a 10 times multiple after tax. But Caremark shareholders will get none of that up front. Instead they will have to wait and hope integration goes well – as well as sharing gains with CVS’s shareholders. Talk of additional revenue synergies should also be viewed sceptically for now.

It might be argued that CVS shares are undervalued, giving Caremark’s owners a hidden premium. But Caremark shares have actually underperformed this year, albeit partly thanks to negative headlines including news of official investigations of its stock options grants. At first blush, at least, CVS looks to have struck the more advantageous deal.

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