CtW Investment Group, which advises pension funds that own about 1.5 million shares of Caremark Rx common stock, said on Monday it opposed the pharmacy-benefits manager's planned $23.7 billion takeover by CVS.
CtW said it would be urging Caremark shareholders, including the pension funds and investment managers, to vote against the deal.
"The CVS offer provides inadequate value to Caremark shareholders," CtW said. "The Caremark board ran a flawed negotiating process that did not seek maximum value for shareholders."
CtW noted that it did not endorse Express Scripts' $26.6 billion hostile takeover bid for Caremark.
CtW said it had concerns about the regulatory, financial and integration risks of the Express Scripts offer.
"Our hope is that a shareholder rejection of CVS's proposal would induce the Caremark board to solicit revised and improved proposals from a variety of suitors, including CVS, Express Scripts, and other interested parties," CtW said.
Caremark's shareholders are scheduled to vote on the CVS deal on Feb. 20, while CVS shareholders vote on Feb. 23.
The offer from CVS is currently valued at $54.41 a share, plus a $2 a share dividend. The Express Scripts offer is currently valued at $61.11 a share.
Last week, proxy advisory firm Glass Lewis recommended that Caremark shareholders reject the CVS deal, saying Caremark ran a flawed negotiating process and failed to get a high enough premium for shareholders.
Goldman Sachs analyst John Heinbockel said on Monday that he expects CVS would have to raise its bid by at least $2 per share, or, more likely, anticipate a counteroffer from Express Scripts, "arguing for perhaps a $4 bump."
"In our view, the spread is now too wide for CVS to experience a positive outcome, especially, with proxy advisory firm Glass Lewis' recommending that the deal be rejected," Heinbockel said.
"We are pleased that CtW opposes the proposed acquisition of Caremark by CVS," Express Scripts said. "The Express Scripts offer provides superior and more certain value than the CVS proposal, and would best serve the combined company's stockholders, plan sponsors and patients."
Caremark and CVS could not be immediately reached for comment.