Merck

(MRK) - Get Report

said Tuesday that it plans to distribute the stock of

Medco Health Solutions

, the pharmacy benefits management company the drugmaker is spinning off to its shareholders, on Aug. 19.

In a press release, Merck said it will issue 0.1206 shares of Medco for each share of Merck its stockholders own. Shareholders of record on Aug. 12 will be eligible for the distribution.

As part of the spinoff, Medco is required to pay Merck cash dividends totaling $2 billion. Medco will pay the dividends primarily from the proceeds of its proposed $500 million notes offering, borrowings under its credit line and advances from its accounts receivable financing facility.

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Shares of Merck closed

New York Stock Exchange

trading Monday at $54.13.

Merck

said in May it would spin off Medco. The company had planned last year to offer shares of Medco through an initial public offering, but the IPO was scrubbed because of weak market conditions. Medco had sales of $33 billion in 2002.

On Monday, Medco said a federal judge

approved a settlement in which it will pay $42.5 million to settle class-action claims that it misadministered various pension plans over the last decade. Medco agreed to a number of policy modifications, including a pledge to keep beneficiaries informed when generic equivalents of drugs they're taking become available.