Caremark ( CMX) shareholders face a clear dilemma.

They can follow their board's advice and approve a merger with retail drugstore chain CVS ( CVS), hoping to revolutionize pharmacy services and pocket big payoffs down the road. Or they could rebel and consider a sweeter offer from fellow pharmacy benefit manager Express Scripts ( ESRX), creating a new leader in the mail-order pharmacy industry.

So far, Caremark's largest investors have said little about the company's ongoing support for a CVS offer that looks inadequate to some. No activist shareholders have stormed forward in an effort to block that deal, promote the Express Scripts offer or seek a higher bid from either party. Caremark's shares have spoken instead, falling when a CVS deal looks likely and rising when Express Scripts fights back.

Caremark's stock slipped $1.09 to $55.55 on Tuesday, a day after CVS denounced Express Scripts' effort to start a proxy fight as "nothing more than a publicity stunt." But shares of Express Scripts fell as well, dropping $2.72 to $66.06 Tuesday. The 4% drop suggests Wall Street's enthusiasm for the Express Scripts deal is waning.

Meanwhile, some investors have expressed support for Caremark's stand.

In an email to TheStreet.com on Tuesday, Caremark shareholder Richard Nagler explained why he favors the CVS deal. Nagler has owned more than 30,000 shares of Caremark for the past five years, although he started cutting his stake in mid-2006 and plans to sell the rest "as soon as the price is right." Nagler says he wishes that CVS' offer featured a premium but, due to his concerns about the PBM business model, he still welcomes the deal over Express Scripts' higher bid.

PBMs have come under increasing fire for their lack of transparency and stand accused of saving their clients less money than they should.

"If the CMX-CVS arrangement puts more low-cost retail pharmacies on site or near major employer client locations and the new company is transparent enough to satisfy their clients, the company will prosper," Nagler writes. But "if CMX continues to obfuscate the true financial arrangement or continues to play games with generic pricing and drug rebates, its client base will continue to erode. ... I feel that, for long-term business and strategic advantages, the CMX-CVS so-called 'merger of equals' is best for all."

Some larger investors favor that deal as well. They feel that, together, Caremark and CVS would represent a unique competitor that could offer clients more than stand-alone PBMs. They expect bids from both CVS and Express Scripts to climb going forward, but say they would support CVS even if Express Scripts tops its offer.

Other big investors feel differently, however. They are still waiting for Caremark's management to convince them that the CVS deal makes good sense. By now, they have seen PBM mergers work out fantastically and seem eager to support another. Thus, they look for Caremark to fetch a nice price from Express Scripts - or even rival Medco ( MHS) - and emerge as the nation's premiere PBM in the end.

Meanwhile, Wall Street experts have offered mixed views on the situation.

William Blair analyst Mark Miller feels that CVS' all-stock offer now looks better than it once did. Before, he notes, CVS' bid fell nearly 20% below the cash-and-stock offer from Express Scripts. However, he points out, strong results from CVS have since pushed the company's shares higher and narrowed that gap to around 13%.

Miller has a market-perform rating on CVS' stock. His colleague, John Kreger, has the same rating on Caremark and an outperform rating on Express Scripts.

Kreger, for one, feels that Express Scripts could prevail.

"While publicly stated reactions of CMX shareholders have been limited to date, we expect more opposition in the coming days or weeks (following the board decision), assuming shareholders will give a greater weight to the financial terms of the competing deals and less weight to the strategic differences," Kreger wrote on Tuesday. "In our view, given the ambiguity surrounding the rationale behind the CVS/CMS merger, we believe CMX shareholders may favor ESRX's higher premium and certainty of the half-cash offering."

Regardless of the buyer, Kreger believes that Caremark will fetch a higher price in the end. His firm has provided investment banking services to Caremark in the past. His family owns shares in a trust that has a stake in Express Scripts.

In contrast, A.G. Edwards analyst Andrew Speller questions Express Scripts' chances. He notes the harsh tone used by Caremark's management when rejecting the Express Scripts bid. And he wonders whether the matter will be settled anytime soon.

"If Caremark shareholders vote against the CVS merger, it does not necessarily mean that ESRX will emerge as the winner," writes Edwards, whose firm has no business ties with any of the companies involved. "CVS could negotiate a new deal with different terms.

"In the end, Caremark shareholders hold all the cards in determining the company's fate."

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