CVS Caremark to take over Medicare Prescription Drug Business of Universal American

As per the agreement, CVS Caremark will acquire all of the outstanding stock of Universal American and concurrently distribute to Universal American shareholders 100% of the shares of a newly formed public company (NewCo), which will own all other operations of Universal American, including its Medicare Advantage and Traditional Insurance businesses.

Pursuant to the agreement, CVS Caremark will pay Universal American shareholders $1.25bn plus the excess capital in the entities that operate the Medicare Prescription Drug business as of 31 December, 2010, estimated at $150m, less Universal American’s outstanding debt and trust preferred securities, estimated at $340m.

After payment of other transaction related expenses, Universal American shareholders are expected to receive approximately $12.80 per share to $13.00 per share in cash.

In addition to the cash payment, Universal American shareholders will receive one share of NewCo in exchange for each share of Universal American currently owned.

The transaction is expected to close by the end of the second quarter of 2011 and is subject to customary closing conditions, including approval of Universal American shareholders and necessary regulatory approvals.

Universal American chairman and CEO Richard Barasc said that Universal American will now focus its energies on overcoming the regulatory challenges and building momentum in the Medicare Advantage business to take advantage of their Healthy CollaborationSM approach to healthcare.