Express Scripts/Medco Health Solutions

On July 21, 2011, Express Scripts, Inc. (Nasdaq: ESRX) and Medco Health Solutions, Inc. (NYSE: MHS) today announced that they have entered into a definitive merger agreement. Under the agreement, Medco shareholders will receive $71.36 per share in cash and stock, or $29.1 billion.

Medco shareholders will receive $28.80 in cash and 0.81 shares for each Medco share they own upon closing of the transaction.

Detail from the release: "Under the terms of the agreement, Express Scripts shall form a new holding company called Express Scripts Holding Company. Medco shareholders will receive $28.80 in cash and 0.81 shares of Express Scripts Holding Company for each Medco share they own upon closing of the transaction, and Express Scripts shareholders will become shareholders of Express Scripts Holding Company receiving one share of the new holding company for each share of Express Scripts that they own upon closing. Based on the closing price of Express Scripts stock of $52.54 as of July 20, 2011, the stock component is valued at $42.56 per share, which, when combined with the $28.80 in cash brings the total value per share to Medco shareholders of $71.36. This represents a premium to Medco shareholders of 28 percent over Medco's closing share price on July 20, 2011. Upon closing of the transaction, Express Scripts shareholders are expected to own approximately 59 percent of the combined company and Medco shareholders are expected to own approximately 41 percent.

The transaction provides certain value to Medco shareholders through the cash component, as well as continued participation in the future prospects expected to result from the combination through their ownership of approximately 41 percent of Express Scripts Holding Company shares.

The merger is subject to regulatory clearance and Express Scripts' and Medco's shareholder approvals and other customary closing conditions. The terms of the merger agreement provide for the payment of termination fees in certain circumstances, but not in connection with the failure to obtain regulatory clearance. The transaction is expected to close in the first half of 2012.

The corporate headquarters will be in St. Louis and George Paz will serve as chairman and CEO of the combined organization. The Board of Directors will be expanded to include two current independent Medco board members."

Express Scripts' financial advisors are Credit Suisse and Citigroup Global Markets, Inc. Its legal advisor is Skadden, Arps, Slate, Meagher & Flom, LLP. Medco's co-lead financial advisors are J.P. Morgan and Lazard, its legal advisor is Sullivan & Cromwell LLP and its regulatory counsel is Dechert LLP.

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