Pharmacy benefit manager Caremark Rx (CMX) said late on Sunday it had rejected a roughly $26 billion takeover bid from rival Express Scripts, saying it favored an offer of about $22.2 billion from drugstore chain CVS Corp. (CVS).

Caremark said Express Scripts' proposal included "questionable assumptions" on the calculation of synergy benefits and faced significant antitrust risks and timing delays.

In a statement, Caremark said the Express Scripts stock-and-cash proposal "does not constitute, and is not reasonably likely to lead to, a superior proposal."

Caremark said the proposed all-stock deal with CVS presented limited integration risk and significant opportunities for synergies between the two companies.

A merger with CVS is expected to create more than $500 million in cost synergies through the combination of the firms' pharmacy benefits management businesses, Caremark said.

Nashville-based Caremark said its deal with CVS had already received antitrust clearance and the companies expected to close the transaction by the end of the first quarter of 2007.

"We are fully committed to our pending merger with CVS and believe strongly in the financial and strategic merits of the proposed combination," said Mac Crawford, chairman, president and CEO of Caremark.

Express Scripts said in an e-mailed statement it "remains committed to pursuing a combination" with Caremark. It added that its offer "represents a superior proposal."

"We believe that Caremark is using antitrust as a red herring to distract stockholders from the real value differential at issue," the statement said.

PREMIUM

Express Scripts' proposal presents stockholders with a 13-percent premium to the proposed CVS acquisition price, based on the closing prices as of January 5, the company said.

Caremark said The proposal from rival pharmacy benefit manager Express Scripts lacked strategic rationale and created the risk of significant customer attrition and destruction of shareholder value.

The Express Scripts plan would also result in a "highly leveraged and weakened business" with diminished financial strength, it added.

"Our board gave careful consideration to Express Scripts' proposal," said Crawford. "In the end, our conclusion was simple and straightforward: Express Scripts' proposal is not in the best interests of Caremark, its shareholders, customers and consumers."

Express Scripts said that a combined company would generate substantial free cash flow, which would let it reduce acquisition-related debt, return to historical leverage levels and continue to invest in the company.

Pharmacy benefit managers, or PBMs, administer prescription drug benefits for employers and health plans, brokering deals in part by buying medicines in bulk from manufacturers.

PBMs also operate large pharmacies that deliver prescriptions by mail.