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CVS Holders Back Deal

Caremark investors will vote tomorrow.

It's one down and one to go for the

CVS

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Caremark

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merger.

CVS shareholders overwhelmingly supported the big linkup, which matches a big retail drug chain with a mail order pharmacy, at a special meeting on Thursday. Nearly 92% cast their votes in favor.

To declare victory, however, CVS must yet win over Caremark shareholders in a vote due Friday morning. Many still seem to feel shortchanged by the deal, though action on Wall Street increasingly suggests that Caremark holders will approve the thrice-sweetened, $26 billion cash-and-stock merger.

CalPers, one of the most influential investment funds in the country, has voted its shares of both CVS and Caremark against the planned merger. CtW -- a pension advisory firm -- continues to voice concerns as well.

Michael Garland, director of value strategies at CtW, showed up to question the deal at CVS' special meeting on Thursday. Garland says that no CVS directors actually attended the meeting and that he raised the only objection before the votes sailed through.

Garland insisted that Caremark directors had failed to look out for their shareholders and should not be allowed to serve on the board of the combined company as a result. If the merger goes through, CtW plans to withhold its own support for those directors during CVS' annual meeting this spring.

But CtW would prefer to block the merger instead. The firm's lawyer, Brishen Rogers, plans to voice his objections at Caremark's meeting on Friday. He, at least, is expected to have some company.

Most proxy advisory firms, besides heavyweight Institutional Shareholder Services, continue to oppose the merger.

"We've been on the road talking to public pension funds ... and there is a growing coalition that's lining up against this deal," Garland says. "I think it's fair to say that this is an unusually stark case of a board failing to adequately represent its shareholders."

But, he concedes, "we still don't know what's going to happen."