As filed with the U.S. Securities and Exchange Commission on November 14, 2011

Registration No. 333-177187

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

AMENDMENT NO. 1
TO
Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

ARISTOTLE HOLDING, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

c/o Express Scripts, Inc.

One Express Way

St. Louis, Missouri 63121

(314) 996-0900

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

 

Keith J. Ebling, Esq.

Executive Vice President, General Counsel and Corporate Secretary

Express Scripts, Inc.

One Express Way

St. Louis, Missouri 63121

(314) 996-0900

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

With copies to:

 

 

 

 

 

Approximate date of commencement of the proposed sale of the securities to the public:  As soon as practicable after this Registration Statement becomes effective and upon completion of the mergers described in the enclosed joint proxy statement/prospectus.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

(Do not check if a smaller reporting company)

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

PRELIMINARY — SUBJECT TO COMPLETION — DATED NOVEMBER 14, 2011

 

 

TO THE STOCKHOLDERS OF EXPRESS SCRIPTS, INC. AND MEDCO HEALTH SOLUTIONS, INC.
MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

 

November 14, 2011

 

Dear Stockholders:

 

Express Scripts, Inc. (“Express Scripts”) and Medco Health Solutions, Inc. (“Medco”) have entered into a merger agreement providing for the combination of Express Scripts and Medco under a new holding company named Aristotle Holding, Inc. The mergers will combine the expertise of two complementary pharmacy benefit managers to accelerate efforts to lower the cost of prescription drugs and improve the quality of care for Americans. George Paz will serve as chairman and CEO of the combined organization. The board of directors of the combined company will consist of the current members of the board of directors of Express Scripts and two current independent Medco board members.

 

Upon completion of the mergers, Express Scripts stockholders will receive one share of common stock of Aristotle Holding, Inc. for each share of Express Scripts common stock. For each share of Medco common stock, Medco stockholders will receive (i) $28.80 in cash, without interest, and (ii) 0.81 shares of common stock of Aristotle Holding, Inc. We anticipate that Express Scripts stockholders will hold approximately 59%, and Medco stockholders will hold approximately 41%, of the shares of Aristotle Holding, Inc.’s common stock issued and outstanding immediately after the consummation of the mergers. Aristotle Holding, Inc. intends to apply to list its common stock on the NASDAQ under the symbol “ESRX,” subject to official notice of issuance and, following consummation of the mergers, we anticipate that Aristotle Holding, Inc. will change its name to “Express Scripts Holding Company.”

 

Completion of the mergers requires, among other things, the separate approvals of both Express Scripts stockholders and Medco stockholders. To obtain these required approvals, Express Scripts will hold a special meeting of Express Scripts stockholders on December 21, 2011 and Medco will hold a special meeting of Medco stockholders on December 21, 2011.

 

 

Information about the special meetings, the mergers and the other business to be considered by Express Scripts stockholders and Medco stockholders is contained in this document and the documents incorporated by reference, which we urge you to read carefully. In particular, see “Risk Factors” beginning on page 37.

 

Your vote is very important. Whether or not you plan to attend the special meeting of Express Scripts stockholders or the special meeting of Medco stockholders, as applicable, please submit a proxy to vote your shares as soon as possible to make sure your shares are represented at the applicable special meeting. Your failure to vote will have the same effect as voting against the proposal to adopt the merger agreement.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities to be issued in connection with the mergers or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

The accompanying joint proxy statement/prospectus is dated November 14, 2011, and is first being mailed or otherwise delivered to stockholders of Express Scripts and stockholders of Medco on or about November 18, 2011.

 

ADDITIONAL INFORMATION

 

The accompanying joint proxy statement/prospectus incorporates by reference important business and financial information about Express Scripts and Medco from documents that are not included in or delivered with the joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in the joint proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

 

In addition, if you have questions about the mergers or the special meetings, or if you need to obtain copies of the accompanying joint proxy statement/prospectus, proxy cards, election forms or other documents incorporated by reference in the joint proxy statement/prospectus, you may contact the appropriate contact listed below. You will not be charged for any of the documents you request.

 

 

If you would like to request documents, please do so by December 19, 2011, in order to receive them before the special meetings.

 

For a more detailed description of the information incorporated by reference in the accompanying joint proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information” beginning on page 208 of the accompanying joint proxy statement/prospectus.

EXPRESS SCRIPTS, INC.

One Express Way

Saint Louis, Missouri 63121

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

December 21, 2011

 

The board of directors of Express Scripts, Inc. has called for a special meeting of the stockholders of Express Scripts, Inc., a Delaware corporation (“Express Scripts”), to be held at the principal executive offices of Express Scripts, One Express Way, Saint Louis, Missouri 63121, on December 21, 2011 at 7:30 a.m., Central time, to consider and vote upon the following matters:

 

1. to adopt the Agreement and Plan of Merger, dated as of July 20, 2011, as amended on November 7, 2011 and as it may be amended from time to time (the “merger agreement”), by and among Express Scripts, Medco Health Solutions, Inc. (“Medco”), Aristotle Holding, Inc. (“New Express Scripts”), Aristotle Merger Sub, Inc., and Plato Merger Sub, Inc; and

 

2. to approve the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement).

 

 

The record date for the determination of the stockholders entitled to notice of, and to vote at, the Express Scripts special meeting, or any adjournment or postponement of the Express Scripts special meeting, was the close of business on November 4, 2011. At least ten days prior to the meeting, a complete list of stockholders of record as of November 4, 2011 will be available for inspection by any stockholder for any purpose germane to the meeting, during ordinary business hours, at the office of the Secretary of the Company at One Express Way, Saint Louis, Missouri 63121. As a stockholder of record, you are cordially invited to attend the meeting in person. Regardless of whether you expect to be present at the meeting, please either complete, sign and date the enclosed proxy card and mail it promptly in the enclosed envelope, or vote electronically via the Internet or telephone as described in greater detail in the proxy statement and on the enclosed proxy card. Returning the enclosed proxy card, or voting electronically or telephonically, will not affect your right to vote in person if you attend the meeting. You should NOT send certificates representing Express Scripts common stock with the proxy.

 

By Order of the Board of Directors,

 

Keith J. Ebling

Executive Vice President, General Counsel
and Corporate Secretary

 

One Express Way

Saint Louis, Missouri 63121

November 14, 2011

 

YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY, WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE MERGERS OR THE SPECIAL MEETING PLEASE CONTACT EXPRESS SCRIPTS, INC., ATTENTION: INVESTOR RELATIONS, ONE EXPRESS WAY, SAINT LOUIS, MISSOURI 63121, (314) 810-3115. IF YOU HAVE QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE FOLLOW THE CONTACT INSTRUCTIONS ON YOUR PROXY CARD.

 

MEDCO HEALTH SOLUTIONS, INC.

100 Parsons Pond Drive

Franklin Lakes, New Jersey 07417

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

December 21, 2011

 

The board of directors of Medco Health Solutions, Inc. has called for a special meeting of the stockholders of Medco Health Solutions, Inc., a Delaware corporation (“Medco”), to be held at the Woodcliff Lake Hilton, 200 Tice Boulevard, Woodcliff Lake, New Jersey 07677 on December 21, 2011 at 9:00 a.m., Eastern time, to consider and vote upon the following matters:

 

1. to adopt the Agreement and Plan of Merger, dated as of July 20, 2011, as amended on November 7, 2011 and as it may be amended from time to time (the “merger agreement”), by and among Express Scripts, Inc., Medco, Aristotle Holding, Inc., Aristotle Merger Sub, Inc., and Plato Merger Sub, Inc;

 

2. to approve the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement); and

 

3. to approve, by non-binding advisory vote, certain compensation arrangements for Medco’s named executive officers in connection with the mergers contemplated by the merger agreement.

 

 

Holders of Medco common stock of record at the close of business on November 4, 2011 are entitled to vote at the Medco special meeting, or any adjournment or postponement of the Medco special meeting. At least ten days prior to the meeting, a complete list of stockholders of record as of November 4 will be available for inspection by any stockholder for any purpose germane to the meeting, during ordinary business hours, at the office of the Secretary of Medco at 100 Parsons Pond Drive, Franklin Lakes, New Jersey 07417. As a stockholder of record, you are cordially invited to attend the meeting in person. Regardless of whether you expect to be present at the meeting, please either complete, sign and date the enclosed proxy card and mail it promptly in the enclosed envelope, or vote electronically via the Internet or telephone as described in greater detail in the proxy statement and on the enclosed proxy card. Returning the enclosed proxy card, or voting electronically or telephonically, will not affect your right to vote in person if you attend the meeting. You should NOT send certificates representing Medco common stock with the proxy.

 

By Order of the Board of Directors,

 

Thomas M. Moriarty

General Counsel, Secretary and President,
Global Pharmaceutical Strategies

 

November 14, 2011

 

YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY, WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE MERGERS OR THE SPECIAL MEETING PLEASE CONTACT MEDCO HEALTH SOLUTIONS, INC., ATTENTION: INVESTOR RELATIONS, 100 PARSONS POND DRIVE, FRANKLIN LAKES, NEW JERSEY 07471, (201) 269-3400. IF YOU HAVE QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE FOLLOW THE CONTACT INSTRUCTIONS ON YOUR PROXY CARD.

 

JOINT PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS

 

 

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the mergers and the special meetings. These questions and answers may not address all questions that may be important to you as a stockholder. To better understand these matters, and for a description of the legal terms governing the mergers, you should carefully read this entire joint proxy statement/prospectus, including the annexes, as well as the documents that have been incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 208. All references in this joint proxy statement/prospectus to “Express Scripts” refer to Express Scripts, Inc., a Delaware corporation; all references in this joint proxy statement/prospectus to “Medco” refer to Medco Health Solutions, Inc., a Delaware corporation; all references in this joint proxy statement/prospectus to “New Express Scripts” refer to Aristotle Holding, Inc. (which we anticipate will change its name to “Express Scripts Holding Company” following consummation of the mergers), a Delaware corporation and a direct wholly owned subsidiary of Express Scripts; all references in this joint proxy statement/prospectus to “Express Scripts Merger Sub” refer to Aristotle Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of New Express Scripts; all references in this joint proxy statement/prospectus to “Medco Merger Sub” refer to Plato Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of New Express Scripts; all references in this joint proxy statement/prospectus to the “Merger Subs” refer to the Express Scripts Merger Sub and the Medco Merger Sub, collectively; unless otherwise indicated or as the context requires, all references in this joint proxy statement/prospectus to “we” refer to Express Scripts and Medco; and all references to the “merger agreement” refer to the Agreement and Plan of Merger, dated as of July 20, 2011, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of November 7, 2011 (which we refer to as the first amendment to the merger agreement), and as it may be amended from time to time, by and among Express Scripts, Medco, New Express Scripts, Express Scripts Merger Sub and Medco Merger Sub, a copy of which is attached as Annex A to this joint proxy statement/prospectus.

 

About the Mergers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“FOR” the proposal to adopt the merger agreement;

 

“FOR” the proposal to approve the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement); and

 

“FOR” the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for Medco’s named executive officers in connection with the mergers contemplated by the merger agreement.

 

 

 

 

“FOR” the proposal to adopt the merger agreement; and

 

“FOR” the proposal to approve the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement).

 

 

 

 

 

 

 

 

 

 

About the Special Meetings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following summary highlights selected information from this joint proxy statement/prospectus and may not contain all of the information that may be important to you. Accordingly, stockholders are encouraged to carefully read this entire joint proxy statement/prospectus, its annexes and the documents referred to or incorporated by reference in this joint proxy statement/prospectus. Each item in this summary includes a page reference directing you to a more complete description of that item. Please see the section entitled “Where You Can Find More Information” beginning on page 208.

 

Express Scripts, Inc.

 

Express Scripts, Inc., which we refer to as Express Scripts, was incorporated in Missouri in September 1986, and reincorporated in Delaware in March 1992. Express Scripts provides integrated pharmacy benefit management services including network-pharmacy claims processing, home delivery services, specialty benefit management, benefit-design consultation, drug-utilization review, formulary management, and medical and drug data analysis services. Express Scripts also distributes a full range of biopharmaceutical products and provides extensive cost-management and patient-care services. Express Scripts’ principal executive offices are located at One Express Way, Saint Louis, Missouri, 63121. Express Scripts’ telephone number is (314) 996-0900 and its web site is www.express-scripts.com.

 

Medco Health Solutions, Inc.

 

The predecessor entity to Medco Health Solutions, Inc. was originally incorporated in June 1983 and operated as a publicly traded company from 1984 until its acquisition by Merck & Co., Inc. in 1993. After its spin-off from Merck & Co., Inc., Medco Health Solutions, Inc., which we refer to as Medco, became an independent publicly traded company on August 19, 2003. Medco provides pharmacy benefit management services, including comprehensive management of prescription claims, benefit-design consultation, clinical management services, clinical and specialty pharmacy services and research support. Medco’s principal executive offices are located at 100 Parsons Pond Drive, Franklin Lakes, New Jersey 07417. Medco’s telephone number is (201) 269-3400 and its web site is www.medcohealth.com.

 

Aristotle Holding, Inc.

 

Aristotle Holding, Inc., which we refer to as New Express Scripts, is a Delaware corporation and a direct wholly owned subsidiary of Express Scripts. Aristotle Holding, Inc. was organized on July 15, 2011, solely for the purpose of effecting the mergers and, following consummation of the mergers, we anticipate that Aristotle Holding, Inc. will change its name to “Express Scripts Holding Company.” Pursuant to the merger agreement, Plato Merger Sub, Inc. will be merged with and into Medco, and Aristotle Merger Sub, Inc. will be merged with and into Express Scripts. As a result, Medco and Express Scripts will each become wholly owned subsidiaries of New Express Scripts. As a result of the transactions contemplated by the merger agreement, New Express Scripts will become a publicly traded corporation, and former Medco and Express Scripts stockholders will own stock in New Express Scripts. New Express Scripts has not carried on any activities other than in connection with the mergers. New Express Scripts’ principal executive offices are located at One Express Way, Saint Louis, Missouri 63121.

 

Aristotle Merger Sub, Inc.

 

Aristotle Merger Sub, Inc., which we refer to as Express Scripts Merger Sub, is a Delaware corporation and a direct wholly owned subsidiary of New Express Scripts. Express Scripts Merger Sub was organized on July 15, 2011, solely for the purpose of effecting the mergers. Express Scripts Merger Sub will be merged with and into Express Scripts and, as a result, Express Scripts will become a wholly owned subsidiary of New Express Scripts. It has not carried on any activities other than in connection with the mergers. Express Scripts Merger Sub’s principal executive offices are located at One Express Way, Saint Louis, Missouri 63121.

Plato Merger Sub, Inc.

 

Plato Merger Sub, Inc., which we refer to Medco Merger Sub, is a Delaware corporation and a direct wholly owned subsidiary of New Express Scripts. Medco Merger Sub was organized on July 15, 2011, solely for the purpose of effecting the mergers. Medco Merger Sub will be merged with and into Medco and, as a result, Medco will become a wholly owned subsidiary of New Express Scripts. It has not carried on any activities other than in connection with the mergers. Medco Merger Sub’s principal executive offices are located at One Express Way, Saint Louis, Missouri 63121.

 

Express Scripts and Medco have entered into the merger agreement providing for the combination of Express Scripts and Medco under a new holding company, New Express Scripts. As a result of the transactions contemplated by the merger agreement, former Medco stockholders and Express Scripts stockholders will own stock in New Express Scripts, which is expected to be listed for trading on the NASDAQ. Pursuant to the merger agreement, Medco Merger Sub will be merged with and into Medco, and Express Scripts Merger Sub will be merged with and into Express Scripts. As a result, Medco and Express Scripts will each become wholly owned subsidiaries of New Express Scripts.

The organization of Express Scripts, Medco and New Express Scripts before and after the mergers is illustrated on the following page.

 

 

As a result of the Medco merger, each outstanding share of Medco common stock, other than Medco excluded shares, will be converted into (i) the right to receive $28.80 in cash, without interest and (ii) 0.81 shares of validly issued, fully paid and non-assessable of New Express Scripts common stock, par value $0.01 per share, which we refer to as New Express Scripts common stock. Medco stockholders will not receive any fractional shares of New Express Scripts common stock pursuant to the Medco merger. Instead of receiving any fractional shares, each holder of Medco common stock will be paid an amount in cash, without interest, rounded down to the nearest cent, equal to the product of (A) the amount of the fractional share interest in a share of New Express Scripts common stock to which such holder would otherwise be entitled (rounded to three decimal places) and (B) an amount equal to the average of the closing sale prices of Express Scripts common stock on the NASDAQ for each of the 15 consecutive trading days ending with the fourth complete trading day prior to the closing date. A description of the New Express Scripts common stock to be issued in connection with the Medco merger is set forth under the section entitled “Description of New Express Scripts Capital Stock” beginning on page 187.

 

As a result of the Express Scripts merger, each outstanding share of Express Scripts common stock, other than Express Scripts excluded shares, will be converted into one share of New Express Scripts common stock (without the requirement to surrender any certificate previously representing any shares of Express Scripts common stock or the issuance of new certificates representing New Express Scripts common stock). A description of the New Express Scripts common stock to be issued in connection with the Express Scripts merger is set forth in the section entitled “Description of New Express Scripts Capital Stock” beginning on page 187.

 

Based on the number of shares of Medco common stock outstanding as of November 4, 2011 and the number of shares of Express Scripts common stock outstanding as of November 4, 2011, the latest practicable date before the printing of this joint proxy statement/prospectus, and assuming no Medco stock options or Express Scripts stock options are exercised between November 4, 2011 and the effective times of the mergers, the total number of shares of New Express Scripts common stock will be approximately 799,084,088.

 

Express Scripts common stock is listed on the NASDAQ under the symbol “ESRX.” Medco common stock is listed on the NYSE under the symbol “MHS.” The following table shows the closing prices of Express Scripts common stock and Medco common stock as reported on July 20, 2011, the last trading day before the merger agreement was publicly announced, and on November 10, 2011, the last practicable trading day before the date of this joint proxy statement/prospectus. This table also shows the value of the Medco merger consideration per share of Medco common stock, which was calculated by adding (i) the cash portion of the Medco merger consideration, or $28.80, and (ii) the closing price of Express Scripts common stock as of the specified date multiplied by the exchange ratio of 0.81.

 

 

The market prices of Express Scripts common stock and Medco common stock will fluctuate prior to the consummation of the mergers. You should obtain current market quotations for the shares.

 

Neither Medco nor Express Scripts currently pays a quarterly dividend on its common stock. Under the terms of the merger agreement, during the period before the effective times of the mergers, Medco is prohibited from paying any dividends on its common stock and Express Scripts is prohibited from paying any

dividend on its common stock, unless Medco or Express Scripts has received written consent from the other party.

 

Date, Time and Place

 

A special meeting of the stockholders of Medco will be held at the Woodcliff Lake Hilton, 200 Tice Boulevard, Woodcliff Lake, New Jersey 07677 on December 21, 2011, at 9:00 a.m., Eastern time, unless the special meeting is adjourned or postponed.

 

Purpose of the Special Meeting

 

At the special meeting, Medco stockholders will be asked to consider and vote upon the following matters:

 

 

Record Date; Shares Entitled to Vote

 

Only holders of record of shares of Medco common stock at the close of business on the Medco record date (November 4, 2011) will be entitled to vote shares held at that date at the Medco special meeting or any adjournments or postponements thereof. Each outstanding share of Medco common stock entitles its holder to cast one vote.

 

As of the Medco record date, there were 387,152,813 shares of Medco common stock outstanding and entitled to vote at the Medco special meeting.

 

Vote Required

 

Proposal to Adopt the Merger Agreement by Medco stockholders:  Adopting the merger agreement requires the affirmative vote of holders of a majority of the shares of Medco common stock outstanding and entitled to vote. Accordingly, a Medco stockholder’s failure to submit a proxy card or to vote in person at the special meeting, an abstention from voting, or the failure of a Medco stockholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Proposal to Adjourn the Medco Special Meeting by Medco stockholders:  Approving the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement) requires the affirmative vote of holders of a majority of the shares of Medco common stock present, in person or represented by proxy, at the special meeting and entitled to vote on the adjournment proposal. Accordingly, abstentions will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting, while broker non-votes and shares not in attendance at the special meeting will have no effect on the outcome of any vote to adjourn the special meeting.

 

Proposal Regarding Certain Medco Merger-Related Executive Compensation Arrangements:  In accordance with Section 14A of the Exchange Act, Medco is providing stockholders with the opportunity to approve, by non-binding, advisory vote, certain compensation payments for Medco’s named executive officers in connection with the mergers, as reported in the section of this joint proxy statement/prospectus entitled “Advisory Vote on Merger-related Compensation for Medco Named Executive Officers” beginning on page 182. Approving this merger-related executive compensation requires the affirmative vote of holders of a majority of

the shares of Medco common stock present, in person or represented by proxy, at the special meeting and entitled to vote on the proposal to approve such merger-related compensation. Accordingly, abstentions will have the same effect as a vote “AGAINST” the proposal to approve the merger-related executive compensation, while broker non-votes and shares not in attendance at the special meeting will have no effect on the outcome of any vote to approve the merger-related executive compensation.

 

Date, Time and Place

 

A special meeting of the stockholders of Express Scripts will be held at the principal executive offices of Express Scripts, One Express Way, Saint Louis, Missouri 63121 on December 21, 2011, at 7:30 a.m., Central time, unless the special meeting is adjourned or postponed.

 

Purposes of the Special Meeting

 

At the special meeting, Express Scripts stockholders will be asked to consider and vote upon the following matters:

 

 

Record Date; Shares Entitled to Vote

 

Holders of Express Scripts common stock as of the close of business on the Express Scripts record date (November 4, 2011) are entitled to vote at the special meeting or any adjournment or postponement thereof. Each share of Express Scripts common stock is entitled to one vote. As of the Express Scripts record date, 485,490,309 shares of Express Scripts common stock were outstanding.

 

Vote Required

 

Proposal to Adopt the Merger Agreement by Express Scripts stockholders:  Adopting the merger agreement requires the affirmative vote of holders of a majority of the shares of Express Scripts common stock outstanding and entitled to vote. Accordingly, an Express Scripts stockholder’s failure to submit a proxy card or to vote in person at the special meeting, an abstention from voting, or the failure of an Express Scripts stockholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Proposal to Adjourn the Express Scripts Special Meeting by Express Scripts stockholders:  Approving the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement) requires the affirmative vote of holders of a majority of the shares of Express Scripts common stock present, in person or represented by proxy, at the special meeting and entitled to vote on the adjournment proposal, regardless of whether a quorum is present. Accordingly, abstentions will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting, while broker non-votes and shares not in attendance at the special meeting will have no effect on the outcome of any vote to adjourn the special meeting.

 

The Medco board has unanimously (i) approved the merger agreement and consummation of the Medco merger upon the terms and subject to the conditions set forth in the merger agreement, (ii) determined that the terms of the merger agreement, the Medco merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Medco and its stockholders, (iii) directed that the merger agreement be submitted to Medco stockholders for adoption at the Medco special meeting, (iv) recommended

that Medco’s stockholders adopt the merger agreement and (v) declared that the merger agreement is advisable. In addition, on November 7, 2011, the Medco board approved the first amendment to the merger agreement and recommended that Medco’s stockholders adopt the merger agreement as so amended.

 

THE MEDCO BOARD UNANIMOUSLY RECOMMENDS THAT MEDCO STOCKHOLDERS VOTE:

 

 

We refer to the recommendation that Medco stockholders vote “FOR” the proposal to adopt the merger agreement as the Medco recommendation. See “The Mergers — Recommendation of the Medco board; Medco’s Reasons for the Merger” beginning on page 86.

 

The Express Scripts board has unanimously (i) approved the merger agreement and the consummation of the transactions contemplated by the merger agreement upon the terms and subject to the conditions set forth in the merger agreement, (ii) determined that the terms of the Express Scripts merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Express Scripts and its stockholders, (iii) directed that the merger agreement be submitted to Express Scripts stockholders for adoption, (iv) recommended that Express Scripts stockholders adopt the merger agreement and (v) declared that the merger agreement is advisable.

 

THE EXPRESS SCRIPTS BOARD UNANIMOUSLY RECOMMENDS THAT EXPRESS SCRIPTS STOCKHOLDERS VOTE:

 

 

We refer to the recommendation that Express Scripts stockholders vote “FOR” the proposal to adopt the merger agreement as the Express Scripts recommendation. See “The Mergers — Recommendation of the Express Scripts Board; Express Scripts’ Reasons for the Mergers” beginning on page 105.

 

Opinion of J.P. Morgan Securities LLC

 

On July 20, 2011, J.P. Morgan Securities LLC, which we refer to as J.P. Morgan, rendered its oral opinion, subsequently confirmed in writing on the same day, to the Medco board that, as of such date and subject to the various factors, procedures, assumptions, qualifications and limitations set forth in its written opinion, the Medco merger consideration to be paid in the Medco merger was fair, from a financial point of view, to the holders of Medco’s common stock.

 

The full text of J.P. Morgan’s written opinion dated July 20, 2011, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of J.P. Morgan’s opinion set forth in this joint proxy statement/prospectus under the caption titled “Opinions of Financial Advisors to Medco — Opinion of J.P. Morgan” beginning on page 90 is qualified in its entirety by reference to the full text of the opinion.

Medco’s stockholders are urged to read the opinion in its entirety. J.P. Morgan provided its opinion for the information of the Medco board (in its capacity as such) in connection with and for the purposes of its evaluation of the transactions contemplated by the merger agreement. J.P. Morgan’s written opinion addresses only the fairness of the Medco merger consideration to be paid to the holders of Medco’s common stock in the Medco merger, and does not address any other matter. J.P. Morgan’s opinion does not constitute a recommendation to any of Medco’s stockholders as to how such stockholder should vote with respect to the transactions contemplated in the merger agreement or any other matter. The Medco merger consideration to be paid to the holders of Medco’s common stock in the Medco merger was determined in negotiations between Medco and Express Scripts, and the decision to approve and recommend the transactions contemplated in the merger agreement was made independently by the Medco board. J.P. Morgan’s opinion and financial analyses were among the many factors considered by the Medco board in its evaluation of the transactions contemplated by the merger agreement and should not be viewed as determinative of the views of the Medco board or management with respect to the transactions contemplated by the merger agreement or the Medco merger consideration.

 

J.P. Morgan and Lazard are collectively referred to herein as Medco’s financial advisors.

 

Opinion of Lazard Frères & Co. LLC

 

On July 20, 2011, Lazard Frères & Co. LLC, which we refer to as Lazard, rendered its oral opinion to the Medco board of directors, subsequently confirmed in writing, that, as of such date, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth therein, the per share merger consideration to be paid to holders of Medco common stock (other than shares of Medco common stock held in treasury by Medco or owned by Medco, Medco Merger Sub or any other wholly owned subsidiary of Medco, or holders who are entitled to and properly demand an appraisal of their shares of Medco common stock) in the mergers was fair, from a financial point of view, to such holders.

 

The full text of Lazard’s written opinion, dated July 20, 2011, which sets forth the assumptions made, procedures followed, factors considered, and qualifications and limitations on the review undertaken by Lazard in connection with its opinion is attached to this joint proxy statement/prospectus as Annex C and is incorporated into this joint proxy statement/prospectus by reference. We encourage you to read Lazard’s opinion, and the section titled “Opinions of Financial Advisors to Medco — Opinion of Lazard” beginning on page 97, carefully and in their entirety. Lazard’s opinion was directed to Medco’s board of directors for the information and assistance of the Medco board of directors in connection with its evaluation of the transactions contemplated by the merger agreement and only addressed the fairness, from a financial point of view, to the holders of Medco common stock of the per share merger consideration to be paid to certain holders of Medco common stock in the mergers as of the date of Lazard’s opinion. Lazard’s opinion did not address any other aspect of the transactions contemplated by the merger agreement and was not intended to and does not constitute a recommendation to any holder of Medco common stock as to how such holder should vote or act with respect to the mergers or any matter relating thereto.

 

Opinion of Credit Suisse Securities (USA) LLC

 

In connection with the mergers, Express Scripts’ financial advisor, Credit Suisse Securities (USA) LLC, which we refer to as Credit Suisse, delivered an opinion, dated July 20, 2011, to the Express Scripts board as to the fairness, from a financial point of view and as of the date of such opinion, to Express Scripts of the Medco merger consideration. The full text of Credit Suisse’s written opinion is attached to this joint proxy statement/prospectus as Annex D and sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken. Credit Suisse’s opinion was provided to the Express Scripts board (in its capacity as such) for its information in connection with its evaluation of the Medco merger consideration and did not address any other aspect of the proposed mergers, including the relative merits of the mergers as compared to alternative transactions or strategies that might be available to Express Scripts or the underlying business decision of Express

Scripts to proceed with the mergers. The opinion does not constitute advice or a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the proposed mergers or otherwise.

 

Opinion of Citigroup Global Markets Inc.

 

Citigroup Global Markets Inc., which we refer to as Citigroup, was retained to act as financial advisor to Express Scripts in connection with the proposed transaction. In connection with this engagement, Express Scripts requested Citigroup to evaluate the fairness, from a financial point of view, of the consideration to be issued and paid in the Medco merger by Express Scripts as of the date of Citigroup’s opinion. On July 20, 2011, at a meeting of the Express Scripts board, Citigroup rendered to the Express Scripts board an oral opinion, which was confirmed by delivery of a written opinion dated July 20, 2011, to the effect that, as of that date and based on and subject to the matters, considerations and limitations set forth in the opinion, Citigroup’s work and other factors it deemed relevant, each as described in greater detail in the section titled “The Mergers — Opinions of Financial Advisors to Express Scripts”, the consideration to be issued and paid by Express Scripts in the Medco merger was fair, from a financial point of view, to Express Scripts. Citigroup’s opinion, the issuance of which was approved by Citigroup’s authorized internal committee, was provided to the Express Scripts board in connection with its evaluation of the proposed Medco merger and was limited to the fairness, from a financial point of view, as of the date of the opinion, to Express Scripts of the consideration to be issued and paid by Express Scripts in the Medco merger. Citigroup’s opinion does not address any other aspects or implications of the mergers and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed mergers. The summary of Citigroup’s opinion is qualified in its entirety by reference to the full text of the opinion. We encourage you to read the full text of Citigroup’s written opinion, which is attached to this joint proxy statement/prospectus as Annex E and sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken.

 

Credit Suisse and Citigroup are collectively referred to herein as Express Scripts’ financial advisors.

 

Certain of Medco’s and Express Scripts’ executive officers and directors have financial interests in the mergers that are different from, or in addition to, the interests of Medco’s and Express Scripts’ stockholders. The members of the Medco board and the Express Scripts board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the mergers and in recommending to Medco and Express Scripts stockholders that the merger agreement be adopted. These interests are described in more detail in the section of this document entitled “The Mergers — Interests of Officers and Directors in the Merger” beginning on page 131.

 

Express Scripts and Medco are not required to complete the merger unless a number of regulatory conditions are satisfied or waived. These conditions include: (i) absence of any injunctions, orders or laws that would prohibit, restrain or make illegal the mergers and (ii) receipt of certain regulatory approvals and the completion of certain regulatory filings, including expiration or termination of the waiting period (and any extensions thereof) under the HSR Act, and unless they are not received prior to the fifth business day prior to the outside date, without giving any effect to any extension thereof, certain approvals from, and filings with, the Centers for Medicare & Medicaid Services and certain state insurance departments relating to Express Scripts’ and Medco’s insurance company subsidiaries. Additionally, Express Scripts is not required to complete the mergers unless (i) there are no legal proceedings commenced by a governmental entity seeking an order that would prohibit, restrain or make illegal the consummation of the mergers under U.S. antitrust laws; (ii) there are no motions by a governmental entity pending in a United States Court of Appeals, seeking an expedited appeal of the matters set forth in clause (i) that has been granted; (iii) no request for any such expedited appeal by a governmental entity has been made; and (iv) all deadlines to make any request referred

to in clause (iii) have passed, except in the cases of clauses (iii) and (iv), to the extent any such request or petition has been subsequently denied; provided that the conditions summarized in clauses (iii) and (iv) will cease to be conditions from and after the 5th business day preceding the outside date (as it may be extended) (as more fully described in the section titled “— Termination of the Merger Agreement”).

 

Each of Express Scripts, New Express Scripts and Medco have agreed to use their reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its subsidiaries with respect to the mergers, to consummate the transactions contemplated by the merger agreement as promptly as practicable and to obtain (and to cooperate with the other party to obtain) any consent, authorization, order or approval of, or any exemption by, any governmental entity or any other third party which is required in connection with the transactions contemplated by the merger agreement, and to comply with the terms and conditions of any such consent, authorization, order or approval. These approvals include approval under, or notices pursuant to, the HSR Act and certain approvals from, and filings with, the Centers for Medicare & Medicaid Services and certain state insurance departments relating to Express Scripts’ and Medco’s insurance company subsidiaries.

 

Medco and Express Scripts have also agreed that in no event will Express Scripts or New Express Scripts or their subsidiaries or affiliates be required to (nor will Medco and its subsidiaries be permitted to unless directed by Express Scripts), (i) divest, license, hold separate or otherwise dispose of, or allow a third party to utilize, any portion of its or their respective businesses, assets or contracts (subject to certain exceptions listed below) or (ii) take any other action that may be required or requested by any governmental entity in connection with obtaining the consents, authorizations, orders or approvals contemplated by the merger agreement that would have an adverse impact, in any material respect, on the business of Express Scripts, New Express Scripts, Medco or their respective subsidiaries. However, Express Scripts has agreed, conditioned on the closing, to the extent necessary to ensure satisfaction of certain conditions to the closing of the mergers, on or prior to the outside date (as it may be extended), to:

 

 

While the parties have agreed, under certain circumstances, to take the actions set forth in the paragraph above pursuant to the merger agreement, the parties may also elect to take other actions. Express Scripts, after prior consultation with Medco to the extent practicable, shall have the principal responsibility for devising and implementing the strategy for obtaining any necessary antitrust or competition clearances, and shall take the lead in all meetings and communications with any governmental entity in connection with obtaining any necessary antitrust or competition clearances. The parties have also agreed that, as between Express Scripts and Medco, Express Scripts will determine the manner in which any of the actions specified in the three bullet points above will be implemented.

Under the HSR Act and the rules and regulations promulgated thereunder, the Medco merger may not be consummated until the expiration of a 30-calendar-day waiting period following the parties’ filing of their respective HSR Act notification forms or the earlier termination of that waiting period. If the U.S. Department of Justice, which we refer to as the DOJ, or the Federal Trade Commission, which we refer to as the FTC, issues a Request for Additional Information and Documentary Material, which we refer to as a second request, prior to the expiration of the initial waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after both parties have substantially complied with the request for additional information, unless the waiting period is terminated earlier.

 

Express Scripts and Medco each filed the required HSR notification and report forms on August 3, 2011, commencing the initial 30-calendar-day waiting period. As previously disclosed by each of Medco and Express Scripts in their respective current reports on Form 8-K, filed September 6, 2011, on September 2, 2011, Express Scripts and Medco each received a second request from the FTC in connection with the FTC’s review of the Medco merger. A second request was anticipated by the parties at the time of signing of the merger agreement. Issuance of the second request extends the waiting period under the HSR Act until 30 days after both parties have substantially complied with the requests, unless the waiting period is terminated sooner by the FTC. Express Scripts and Medco have been cooperating with the FTC staff since shortly after the announcement of the mergers and intend to continue to work cooperatively with the FTC staff in the review of the Medco merger. Express Scripts and Medco intend to respond to the second request as promptly as practicable.

 

At any time before or after the mergers are completed, either the DOJ, the FTC or U.S. state attorneys general could take action under the antitrust laws in opposition to the mergers, including seeking to enjoin completion of the mergers, condition completion of the mergers upon the divestiture of assets of Express Scripts, Medco or their subsidiaries or impose restrictions on New Express Scripts’ post-merger operations. Private parties may also seek to take legal action under the antitrust laws under some circumstances.

 

Express Scripts and Medco have been making the necessary notifications and filings with both state and federal regulators, including the Centers for Medicare & Medicaid Services and certain state insurance departments, to obtain the consents, authorizations and approvals contemplated by the merger agreement.

 

Express Scripts and Medco are not aware of any material governmental approvals or actions that are required for completion of the mergers other than those described above. It is presently contemplated that if any such additional governmental approvals or actions are required, those approvals or actions will be sought.

 

Express Scripts and Medco cannot assure you that all of the regulatory approvals described above will be obtained and, if obtained, Express Scripts and Medco cannot assure you as to the timing of any approvals, the ability to obtain the approvals on satisfactory terms or the absence of any litigation challenging such approvals.

 

Upon completion of the Medco merger, Medco stockholders will receive cash consideration of approximately $11.1 billion in the aggregate. The consummation of the mergers is not subject to Express Scripts’ ability to obtain financing. However, Express Scripts intends to obtain financing for a portion of the cash component of the Medco merger consideration.

 

On August 5, 2011, Express Scripts entered into a $14.0 billion unsecured bridge facility, which we refer to as the bridge facility, the terms of which are set forth in a Credit Agreement, dated as of August 5, 2011, which we refer to as the bridge credit agreement, among Express Scripts, New Express Scripts, the lenders named therein, Citibank, N.A., as syndication agent, and Credit Suisse AG, Cayman Islands Branch, which we refer to as CS, as administrative agent. Prior to the consummation of the Express Scripts merger, Express Scripts is the borrower under the bridge facility. New Express Scripts will assume the role, rights and obligations of Express Scripts and become the borrower under the bridge credit agreement upon consummation of the Express Scripts merger. The bridge facility will be available for Express Scripts to pay a portion of the cash consideration in accordance with the merger agreement, to repay any existing indebtedness that will

become due or otherwise default upon consummation of the mergers and to pay related fees and expenses. On August 29, 2011, Express Scripts entered into a five-year $4.0 billion term loan facility, which we refer to as the term facility, and a five-year $1.5 billion revolving loan facility, which we refer to as the revolving facility and, together with the term facility, as the permanent facility, the terms of which are set forth in a Credit Agreement, dated as of August 29, 2011, which we refer to as the term/revolving credit agreement, among Express Scripts, New Express Scripts, the lenders named therein, Citibank, N.A., as syndication agent, and CS, as administrative agent. Prior to the consummation of the Express Scripts merger, Express Scripts is the borrower under the permanent facility. New Express Scripts will assume the role, rights and obligations of Express Scripts and become the borrower under the term/revolving credit agreement upon consummation of the Express Scripts merger. The term facility will be available for Express Scripts to pay a portion of the cash consideration in accordance with the merger agreement, to repay any existing indebtedness that will become due or otherwise default upon consummation of the mergers and to pay related fees and expenses. The revolving facility will be available for working capital needs and general corporate purposes. Upon entry into the term facility, the commitments under the bridge facility were automatically reduced by $4.0 billion. For a more complete description of Express Scripts’ debt financing for the mergers, see the section entitled “Description of Financing” beginning on page 184.

 

Express Scripts intends to borrow $4.0 billion under the term facility in connection with the mergers. The balance of the financing in connection with the mergers could take any of several forms or any combination of them, including but not limited to the following: (i) Express Scripts may draw funds under the bridge facility; (ii) Express Scripts may issue senior notes in the public and/or private capital markets; and (iii) Express Scripts may use cash on hand. When any senior notes are issued, the commitments under the bridge facility will automatically reduce in an amount equal to the aggregate principal amount of such senior notes.

 

In connection with the completion of the mergers, New Express Scripts will guarantee the existing indebtedness of Express Scripts and Medco. New Express Scripts’ pro forma consolidated indebtedness as of September 30, 2011, after giving effect to the mergers, would be approximately $19.8 billion.

 

Subject to certain exceptions, each of Express Scripts and Medco has agreed to not solicit, initiate or knowingly encourage, or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any takeover proposal (as defined in the merger agreement) from any third party, or engage in any discussions or negotiations regarding any takeover proposal. Notwithstanding these restrictions, the merger agreement provides that, prior to obtaining stockholder approval to adopt the merger agreement, under specific circumstances, each of Express Scripts and Medco may provide information to, and engage in discussions and negotiations with, third parties in response to an unsolicited acquisition proposal that constitutes or which is reasonably expected to lead to a superior proposal (as defined in the merger agreement) if the Medco board or the Express Scripts board, as applicable, determines in good faith, after consultation with outside legal counsel, that a failure to take such action with respect to the takeover proposal would be inconsistent with its fiduciary duties to its stockholders under applicable law.

 

The merger agreement generally restricts the ability of each of the Express Scripts and Medco boards of directors from withdrawing its recommendation that its stockholders adopt the merger agreement. However, each of the Express Scripts board and the Medco board may withdraw its recommendation (i) in circumstances not involving or relating to a takeover proposal, if such board concludes in good faith, after consultation with its outside legal counsel, that the failure to take such action would be inconsistent with the exercise of its fiduciary duties to its stockholders under applicable laws; or (ii) in response to a superior proposal, if such board of directors concludes that a failure to change its recommendation would be inconsistent with the exercise of its fiduciary duties to its stockholders under applicable laws and, if requested by the other party, its representatives shall have negotiated in good faith with the other party for six business days (and in the case of any material amendment or modification to such superior proposal, for a period expiring upon the later to

occur of three business days and the end of such six business day period) regarding any revisions to the terms of the transactions contemplated by the merger agreement proposed by the other party in response to such superior proposal. Each of Medco and Express Scripts, as the case may be, have the contractual right to the benefit of the matching rights described in the foregoing sentence no more than one time with respect to a takeover proposal, including any material amendments or modifications thereof.

 

Conditions to Express Scripts’, New Express Scripts’ and Medco’s Obligations to Complete the Mergers

 

The obligations of Express Scripts, Express Scripts Merger Sub and New Express Scripts to consummate the Express Scripts merger and of Medco, Medco Merger Sub and New Express Scripts to consummate the Medco merger are subject to the satisfaction or waiver, to the extent permitted, of the following conditions:

 

 

Conditions to Express Scripts’, New Express Scripts’ and the Merger Subs’ Obligation to Complete the Mergers

 

The obligations of Express Scripts, New Express Scripts and Express Scripts Merger Sub to consummate the Express Scripts merger and of New Express Scripts and Medco Merger Sub to consummate the Medco merger are subject to the satisfaction or waiver, to the extent permitted, of the following conditions:

 

 

Conditions to Medco’s Obligation to Complete the Mergers

 

The obligation of Medco to consummate the Medco merger is subject to the satisfaction or waiver, to the extent permitted, of the following conditions:

 

 

Under the terms of the merger agreement, the closing of the mergers will occur as soon as practicable (but in any event, within three business days) after satisfaction or waiver of the conditions set forth in the merger agreement. We refer to the date on which the closing occurs as the closing date. However, neither Express Scripts nor Medco is obligated to effect the closing prior to the third business day following the final day of a marketing period (described below in the section titled “The Merger Agreement — Marketing Period”) or such earlier date as Express Scripts may request on two business days’ written notice to Medco.

 

The merger agreement may be terminated and the mergers may be abandoned at any time prior to the effective time of the Medco merger, whether before or after the Medco stockholder approval and/or the Express Scripts stockholder approval:

 

 

 

 

 

 

 

 

 

 

All fees and expenses incurred by the parties are to be paid solely by the party that has incurred such fees and expenses except that:

 

 

The merger agreement contains certain termination rights for Express Scripts and provides that Medco will pay Express Scripts a cash termination fee of $650 million, which we refer to as the termination fee, under specified circumstances, including if:

 

 

 

The merger agreement provides that Medco will pay Express Scripts $227.5 million of the termination fee plus Express Scripts’ documented, out of pocket expenses up to $100 million if the merger agreement is, or could have been, terminated as the result of:

 

 

If, within one year of a termination described in either of the previous two bullets, Medco enters into a definitive agreement providing for, or otherwise consummates, a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal” in the merger agreement), then Medco will pay to Express Scripts the full amount of the termination fee less any amount of the termination fee and any expenses previously paid.

 

Notwithstanding the foregoing, in no event shall Express Scripts’ expenses or the full amount of the termination fee be paid more than once, nor shall Express Scripts be paid an aggregate amount pursuant to the expense reimbursement and termination fee provisions of the merger agreement in excess of the full amount of the termination fee.

 

The merger agreement also contains reciprocal termination rights for Medco, specifically that Express Scripts will pay Medco the termination fee under specified circumstances, including if:

 

 

 

The merger agreement provides that Express Scripts will pay Medco $227.5 million of the termination fee plus Medco’s documented, out-of-pocket expenses up to $100 million if the merger agreement is, or could have been, terminated as the result of:

 

 

 

If, within one year of a termination described in either of the two previous bullets, Express Scripts enters into a definitive agreement providing for, or otherwise consummates, a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal”), then Express Scripts will pay to Medco the full amount of the termination fee less any amount of the termination fee and any expenses previously paid.

 

Notwithstanding the foregoing, in no event shall Medco’s expenses or the full amount of the termination fee be paid more than once, nor shall Medco be paid an aggregate amount pursuant to the expense reimbursement and termination fee provisions of the merger agreement in excess of the full amount of the termination fee.

 

It is anticipated that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Code. It is a condition to Medco’s obligation to complete the Medco merger that Medco receive a written opinion of its counsel, Sullivan & Cromwell, to the effect that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Code. It is a condition to Express Scripts’ obligation to complete the Express Scripts merger that New Express Scripts receive an opinion of its counsel, Skadden, to the effect that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Code. If the Express Scripts merger and the Medco merger, taken together, qualify as an exchange described in Section 351, then:

 

 

 

 

You are strongly urged to consult with a tax advisor to determine the particular U.S. federal, state or local or foreign income or other tax consequences of the mergers to you. See “The Mergers — Material U.S. Federal Income Tax Consequences” on page 141.

 

Under Delaware law, holders of shares of Medco common stock that meet certain requirements will have the right to obtain payment in cash for the fair value of their shares of Medco common stock, as determined by the Delaware Court of Chancery, rather than the Medco merger consideration. To exercise appraisal rights, Medco stockholders must strictly follow the procedures prescribed by Delaware law. These procedures are summarized under the section entitled “The Mergers — Appraisal Rights” beginning on page 145. In addition, the text of the applicable appraisal rights provisions of Delaware law is included as Annex H to this joint proxy statement/prospectus.

Under Delaware law, holders of shares of Express Scripts common stock will not have the right to obtain payment in cash for the fair value of their shares of Express Scripts common stock, as determined by the Delaware Court of Chancery, rather than the Express Scripts merger consideration.

 

New Express Scripts common stock received by Medco stockholders in the Medco merger and Express Scripts stockholders in the Express Scripts merger is expected to be listed on the NASDAQ under the symbol “ESRX.” After completion of the mergers, Medco common stock will no longer be listed or traded on the NYSE.

 

As a result of the mergers, the holders of Medco common stock and Express Scripts common stock will become holders of New Express Scripts common stock. Following the mergers, Medco stockholders and Express Scripts stockholders will have different rights as stockholders of New Express Scripts than they had as stockholders of Medco and Express Scripts due to the different provisions of the governing documents of Medco, Express Scripts and New Express Scripts. For additional information comparing the rights of stockholders of Medco, Express Scripts and New Express Scripts, see “Comparison of Stockholder Rights” beginning on page 192.

 

Since the announcement by the parties on July 21, 2011 that they had entered into the merger agreement, lawsuits have been filed by purported stockholders of Medco challenging the mergers. The complaints in the actions name as defendants Medco and/or various members of the Medco board as well as Express Scripts, New Express Scripts and the Merger Subs.

 

The plaintiffs in the purported class action complaints generally allege, among other things, that (i) the members of the Medco board breached their fiduciary duties to Medco and its stockholders by authorizing the mergers and (ii) Express Scripts, New Express Scripts and the Merger Subs aided and abetted the alleged breaches of fiduciary duty by Medco and its directors. The plaintiffs seek, among other things, to enjoin the defendants from consummating the mergers on the agreed-upon terms, and unspecified compensatory damages, together with the costs and disbursements of the action. Further detail concerning these lawsuits are set forth under the section entitled “The Mergers — Litigation Relating to the Mergers” beginning on page 149.

 

The following data, insofar as it relates to each of the years 2006-2010, has been derived from annual financial statements, including the consolidated balance sheets at December 31, 2010 and 2009 and the related consolidated statements of income and of cash flows for each of the three years in the period ended December 31, 2010 and notes thereto which are incorporated by reference in this joint proxy statement/prospectus. The data for the nine months ended September 30, 2011 and 2010 has been derived from unaudited financial statements which are also incorporated by reference in this joint proxy statement/prospectus and which in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Express Scripts or the combined company, and you should read the following information together with Express Scripts’ audited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Express Scripts’ Annual Report on Form 10-K for the year ended December 31, 2010, and Express Scripts’ unaudited condensed consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Express Scripts’ Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, which are incorporated by reference in this joint proxy statement/prospectus. For more information, see the section entitled “Where You Can Find More Information” beginning on page 208.

 

 

 

 

 

 

 

 

 

The following data, insofar as it relates to each of the years 2006-2010, has been derived from annual financial statements, including the consolidated balance sheets at December 25, 2010 and December 26, 2009 and the related consolidated statements of income and of cash flows for each of the three years in the period ended December 25, 2010 and notes thereto which are incorporated by reference in this joint proxy/prospectus. The data for the nine months ended September 24, 2011 and September 25, 2010 has been derived from unaudited financial statements which are incorporated by reference in this joint proxy/prospectus and which in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Medco or the combined company, and you should read the following information together with Medco’s audited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Medco’s Annual Report on Form 10-K for the year ended December 25, 2010, and Medco’s unaudited condensed consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Medco’s Quarterly Report on Form 10-Q for the quarterly period ended September 24, 2011, which are incorporated by reference in this joint proxy statement/prospectus. For more information, see the section entitled “Where You Can Find More Information” beginning on page 208.

 

 

 

 

 

 

 

 

 

The following unaudited pro forma statements of operations data for the year ended December 31, 2010 and the nine months ended September 30, 2011 reflect the mergers of Medco by Express Scripts as if they had occurred on the first day of each period presented. The following unaudited pro forma balance sheet data at September 30, 2011 reflect the mergers as if they had occurred on September 30, 2011. Such pro forma financial data is based on the historical financial statements of Express Scripts and Medco and gives effect to the mergers of Medco by Express Scripts under the acquisition method of accounting for business combinations. The unaudited pro forma condensed combined financial information presented below and throughout this joint proxy statement/prospectus for the year ended December 31, 2010 and as of and for the nine months ended September 30, 2011 includes historical consolidated financial information of Medco that has been derived from Medco’s historical consolidated financial statements for the fiscal year ended December 25, 2010 and as of and for the nine-month period ended September 24, 2011. As a result, the pro forma financial information is based on certain assumptions and adjustments as discussed in the section titled “Unaudited Pro Forma Condensed Combined Financial Statements,” including assumptions relating to the allocation of the consideration paid for the assets acquired and liabilities assumed of Medco based on preliminary estimates of their fair value. The following should be read in connection with the section of this joint proxy statement/prospectus to exchange entitled “Unaudited Pro Forma Condensed Combined Financial Statements,” and other information included in or incorporated by reference into this document.

 

 

Presented below are Express Scripts’ and Medco’s historical per share data for the nine months ended September 30, 2011 and the year ended December 31, 2010 and unaudited pro forma combined per share data for the nine months ended September 30, 2011 and the year ended December 31, 2010. This information should be read together with the consolidated financial statements and related notes of Express Scripts and Medco that are incorporated by reference in this document and with the unaudited pro forma combined financial data included under the “Selected Unaudited Pro Forma Combined Financial Information” section of this document. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the mergers had been completed as of the beginning of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. The historical book value per share is computed by dividing total stockholders’ equity (deficit) by the number of shares of common stock outstanding at the end of the period. The pro forma earnings per share of the combined company is computed by dividing the pro forma net income by the pro forma weighted average number of shares outstanding. The pro forma book value per share of the combined company is computed by dividing total pro forma stockholders’ equity by the pro forma number of shares of common stock outstanding at the end of the period. The Medco unaudited pro forma equivalent per share financial information is computed by multiplying the Express Scripts unaudited pro forma combined per share amounts by the exchange ratio (0.81 shares of Express Scripts common stock for each share of Medco common stock).

 

Neither Express Scripts nor Medco has paid dividends on common stock during 2011 or 2010, and neither entity has any current intention of doing so.

 

 

Express Scripts common stock is traded on the NASDAQ under the symbol “ESRX.” Medco common stock is traded on the NYSE under the symbol “MHS.” The following table sets forth, for the periods indicated, the high and low sales prices per share of Express Scripts common stock and Medco common stock on the NASDAQ and NYSE, respectively.

 

 

 

 

Neither Express Scripts nor Medco has paid dividends on common stock during 2011 or 2010, and neither entity has any current intention of doing so.

 

In addition to the other information included in, or incorporated by reference in, and found in the Annexes attached to, this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 63, you should carefully consider the risks described below before deciding how to vote. You should also read and consider the risk factors associated with each of the businesses of Express Scripts and Medco because these risk factors may affect the operations and financial results of the combined company. These risk factors may be found under Part I, Item 1A in each of Express Scripts’ Annual Report on Form 10-K for the year ended December 31, 2010 and Medco’s Annual Report on Form 10-K for the year ended December 25, 2010 and Part II, Item 1A in each of Express Scripts’ Quarterly Reports on Form 10-Q for the quarters ended September 30, 2011 and June 30, 2011 and Medco’s Quarterly Reports on Form 10-Q for the quarters ended September 24, 2011 and June 25, 2011, each of which is on file with the SEC and all of which are incorporated by reference into this proxy statement/prospectus. Furthermore, you should read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference herein. See “Where You Can Find More Information” beginning on page 208 for the location of information incorporated by reference in this joint proxy statement/prospectus. Additional risks and uncertainties not presently known to Express Scripts or Medco or that are not currently believed to be important also may adversely affect the mergers and New Express Scripts following the mergers.

 

Medco and Express Scripts stockholders cannot be sure of the market value of the shares of New Express Scripts common stock to be issued upon completion of the mergers.

 

Express Scripts stockholders and Medco stockholders will receive a fixed number of shares of New Express Scripts common stock in the mergers rather than a number of shares with a particular fixed market value. The market values of Express Scripts common stock and Medco common stock at the time of the mergers may vary significantly from their prices on the date the merger agreement was executed, the date of this joint proxy statement/prospectus or the date on which Express Scripts stockholders and Medco stockholders vote on the mergers. Because the respective merger consideration exchange ratios will not be adjusted to reflect any changes in the market prices of Express Scripts common stock or Medco common stock, the market value of the New Express Scripts common stock issued in the mergers and the Express Scripts common stock and Medco common stock surrendered in the mergers may be higher or lower than the values of these shares on earlier dates. 100% of the Express Scripts merger consideration to be received by Express Scripts stockholders will be New Express Scripts common stock. The percentage of the value of the Medco merger consideration to be received by Medco stockholders that is comprised of New Express Scripts common stock may fluctuate, but was 60% on July 20, 2011, the last full trading day prior to the announcement of the mergers, and was approximately 57% on November 10, 2011, the latest practicable date before the printing of this joint proxy statement/prospectus.

 

Changes in the market prices of Express Scripts common stock and Medco common stock may result from a variety of factors that are beyond the control of Express Scripts or Medco, including changes in their businesses, operations and prospects, regulatory considerations, governmental actions, and legal proceedings and developments. Market assessments of the benefits of the mergers, the likelihood that the mergers will be completed, the terms and mix of acquisition financing, and general and industry-specific market and economic conditions may also have an effect on the market price of Express Scripts common stock and Medco common stock. Changes in market prices of Medco common stock and Express Scripts common stock may also be caused by fluctuations and developments affecting domestic and global securities markets. Neither Express Scripts nor Medco is permitted to terminate the merger agreement solely because of changes in the market price of either party’s respective common stock.

 

In addition, it is anticipated that the mergers may not be completed until a significant period of time has passed after the special meetings. As a result, the market values of Express Scripts common stock and/or the Medco common stock may vary significantly from the date of the special meetings to the date of the

completion of the mergers. You are urged to obtain up-to-date prices for Express Scripts common stock and the Medco common stock. There is no assurance that the mergers will be completed, that there will not be a delay in the completion of the mergers or that all or any of the anticipated benefits of the mergers will be obtained. See “Comparative Per Share Market Price and Dividend Information” for ranges of historic prices of Express Scripts common stock and Medco common stock.

 

Obtaining required regulatory approvals may prevent or delay completion of the mergers or reduce the anticipated benefits of the mergers or may require changes to the structure or terms of the mergers.

 

Consummation of the mergers is conditioned upon, among other things, the expiration or termination of the waiting period (and any extensions thereof) applicable to the mergers under the HSR Act. At any time before or after the mergers are consummated, any of the DOJ, the FTC or U.S. state attorneys general could take action under the antitrust laws in opposition to the mergers, including seeking to enjoin completion of the mergers, condition completion of the mergers upon the divestiture of assets of Express Scripts, Medco or their subsidiaries or impose restrictions on New Express Scripts’ post-merger operations. These could negatively affect the results of operations and financial condition of the combined company following completion of the mergers. Any such requirements or restrictions may prevent or delay completion of the mergers or may reduce the anticipated benefits of the mergers, which could also have a material adverse effect on the combined company’s business and cash flows, financial condition and results of operations. Additionally, Express Scripts has agreed to take certain actions, conditioned on the closing, and may take other actions that Express Scripts determines in its sole discretion to take, to the extent necessary to ensure satisfaction, on or prior to the outside date (as it may be extended), of certain conditions to the closing of the mergers relating to regulatory approvals as further described in the section titled “The Mergers — Governmental and Regulatory Approvals” beginning on page 139. Certain of these actions may be taken after receipt of the approval of the stockholders of each of Medco and Express Scripts and it is not currently contemplated that any such stockholder approval would be resolicited in the event that any of these actions are taken after the special meetings.

 

Consummation of the mergers is also conditioned upon the receipt of certain approvals from, and making filings with, the Centers for Medicare & Medicaid Services and certain state insurance departments relating to Express Scripts’ and Medco’s insurance company subsidiaries. The condition relating to the receipt of certain approvals from, and making filings with, the Centers for Medicare & Medicaid Services and certain state insurance departments is deemed to be satisfied, if it is not earlier satisfied, on the fifth business day prior to the outside date, without giving effect to any extension thereof. No assurance can be given that the required regulatory approvals will be obtained or that the required conditions to closing will be satisfied, and, even if all such approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals. See “The Merger Agreement — Conditions to Completion of the Mergers” for a discussion of the conditions to the consummation of the mergers and “The Mergers — Regulatory Approvals” for a discussion of the regulatory approvals required in connection with the consummation of the mergers.

 

Failure to successfully combine the businesses of Express Scripts and Medco in the expected time frame may adversely affect New Express Scripts’ future results.

 

The success of the mergers will depend, in part, on New Express Scripts’ ability to realize the anticipated benefits from combining the businesses of Express Scripts and Medco as further described in the section titled “The Mergers — Recommendation of the Express Scripts Board; Express Scripts’ Reasons for the Mergers” beginning on page 105 and “The Mergers — Recommendation of the Medco Board; Medco’s Reasons for the Merger” beginning on page 86. To realize these anticipated benefits, the businesses of Express Scripts and Medco must be successfully combined. Historically, Express Scripts and Medco have been independent companies, and they will continue to be operated as such until the completion of the mergers. The management of New Express Scripts may face significant challenges in consolidating the functions of Medco and Express Scripts, integrating the technologies, organizations, procedures, policies and operations, as well as addressing the different business cultures at the two companies, and retaining key personnel. If the combined company is not successfully integrated, the anticipated benefits of the mergers may not be realized fully or at

all or may take longer to realize than expected. The integration may also be complex and time consuming, and require substantial resources and effort. The integration process and other disruptions resulting from the mergers may also disrupt each company’s ongoing businesses and/or adversely affect our relationships with employees, regulators and others with whom we have business or other dealings.

 

Express Scripts and Medco will be subject to business uncertainties and contractual restrictions while the mergers are pending.

 

Uncertainty about the effect of the mergers on employees and customers may have an adverse effect on Medco or Express Scripts and consequently on the combined company. These uncertainties may impair Medco’s ability to retain and motivate key personnel and could cause customers and others that deal with Medco to defer entering into contracts with Medco or making other decisions concerning Medco or seek to change existing business relationships with Medco. Certain of Medco’s customer contracts contain change of control restrictions that may give rise to a right of termination or cancellation in connection with the mergers. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the mergers, Medco’s and Express Scripts’ business could be harmed. In addition, the merger agreement restricts Express Scripts and Medco from making certain acquisitions and taking other specified actions until the mergers occur without the consent of the other party. These restrictions may prevent Express Scripts and Medco from pursuing attractive business opportunities that may arise prior to the completion of the mergers. See the section entitled “The Merger Agreement — Covenants and Agreements” beginning on page 161 for a description of the restrictive covenants applicable to Express Scripts and Medco.

 

The merger agreement limits Express Scripts’ and Medco’s ability to pursue alternatives to the mergers.

 

Each of Express Scripts and Medco has agreed that it will not solicit, initiate, knowingly encourage or facilitate inquiries or proposals or engage in discussions or negotiations regarding takeover proposals, subject to limited exceptions, including that a party may take certain actions in the event it receives an unsolicited takeover proposal that constitutes a superior proposal or is reasonably expected to lead to a superior proposal, and the party’s board of directors determines in good faith, after consultation with its outside legal counsel, that a failure to take action with respect to such takeover proposal would be inconsistent with its fiduciary duties. Each party has also agreed that its board of directors will not change its recommendation to its stockholders or approve any alternative agreement, subject to limited exceptions, including that, at any time prior to the applicable stockholder or member approval, the applicable board of directors may make a change in recommendation (i) in circumstances not involving or relating to a takeover proposal, if such board concludes in good faith, after consultation with its outside legal counsel, that the failure to take such action would be inconsistent with the exercise of its fiduciary duties to its stockholders under applicable laws; or (ii) in response to a superior proposal, if such board of directors concludes that a failure to change its recommendation would be inconsistent with the exercise of its fiduciary duties to its stockholders under applicable laws and, if requested by the other party, its representatives shall have negotiated in good faith with the other party for six business days (and in the case of any material amendment or modification to such superior proposal, for a period expiring upon the later to occur of three business days and the end of such six business day period) regarding any revisions to the terms of the transactions contemplated by the merger agreement proposed by the other party in response to such superior proposal. The merger agreement also requires each party to call, give notice of and hold a meeting of its stockholders for the purposes of obtaining the applicable stockholder approval. This special meeting requirement does not apply to a party in the event that the merger agreement is terminated in accordance with its terms. See “The Merger Agreement — Stockholders Meeting and Duty to Recommend.” In addition, under specified circumstances, Express Scripts or Medco may be required to pay a termination fee of $950 million, $650 million or $227.5 million (depending on the specific circumstances) if the merger is not consummated. Express Scripts or Medco may also be required to reimburse the other party for its expenses, up to a maximum amount of either $225 million or $100 million (depending on the specific circumstances), in connection with the termination of the merger agreement. See the section entitled “The Merger Agreement — Termination Fees; Expenses” beginning on page 178 for a description of the circumstances under which such termination fees and expense reimbursements are payable. Notwithstanding the foregoing, in no event shall either party’s expenses or the full amount

of the termination fee be paid to such party more than once, nor shall either party be paid an aggregate amount pursuant to the expense reimbursement and termination fee provisions of the merger agreement in excess of the full amount of the termination fee. In addition, upon adoption of the merger agreement by the Express Scripts stockholders or the Medco stockholders at either company’s special meeting, the right of such adopting party to terminate the merger agreement in response to a superior proposal is eliminated. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Express Scripts or Medco from considering or proposing an acquisition, even if it were prepared to pay consideration with a higher price per share than that proposed in the mergers, or might result in a potential competing acquiror proposing to pay a lower price per share to acquire Express Scripts or Medco than it might otherwise have been willing to pay.

 

Certain directors and executive officers of Express Scripts and Medco may have interests in the mergers that are different from, or in addition to or in conflict with, yours.

 

Executive officers of Express Scripts and Medco negotiated the terms of the merger agreement and the boards of Express Scripts and Medco approved the merger agreement and unanimously recommend that you vote in favor of the proposal to adopt the merger agreement. These directors and executive officers may have interests in the mergers that are different from, or in addition to or in conflict with, yours. These interests include the continued employment of certain executive officers of Express Scripts and Medco by New Express Scripts, the continued positions of certain directors of Express Scripts and Medco as directors of New Express Scripts, and the indemnification of former Medco directors and Express Scripts and Medco officers by New Express Scripts and the surviving corporations. With respect to Medco directors and executive officers, these interests also include the treatment in the Medco merger of employment agreements, change-of-control severance agreements, restricted stock units, deferred stock units, options and other rights held by these directors and executive officers. You should be aware of these interests when you consider your board of directors’ recommendation that you vote in favor of the mergers. For a discussion of the interests of directors and executive officers in the mergers, see “The Mergers — Interests of Officers and Directors in the Mergers.”

 

The shares of New Express Scripts common stock to be received by Medco stockholders and Express Scripts stockholders as a result of the mergers will have different rights from shares of Medco common stock and Express Scripts common stock.

 

Following completion of the mergers, Medco stockholders and Express Scripts stockholders will no longer be stockholders of Medco and Express Scripts but will instead be stockholders of New Express Scripts. There will be important differences between your current rights as a Medco stockholder or Express Scripts stockholder and your rights as a New Express Scripts stockholder. See “Comparison of Stockholder Rights” for a discussion of the different rights associated with Express Scripts common stock and Medco common stock.

 

Both Express Scripts stockholders and Medco stockholders will have a reduced ownership and voting interest after the mergers and will exercise less influence over management.

 

After the completion of the mergers, the Express Scripts stockholders and Medco stockholders will own a smaller percentage of New Express Scripts than they currently own of Express Scripts and Medco, respectively. Upon completion of the mergers, it is anticipated that Express Scripts stockholders, on the one hand, and Medco stockholders, on the other hand, will hold approximately 59% and 41%, respectively, of the shares of common stock of New Express Scripts issued and outstanding immediately after the consummation of the mergers. Consequently, Express Scripts stockholders, as a group, and Medco stockholders, as a group, will each have reduced ownership and voting power in the combined company compared to their ownership and voting power in Express Scripts and Medco, respectively. In particular, Medco stockholders, as a group, will have less than a majority of the ownership and voting power of New Express Scripts and, therefore, will be able to exercise less collective influence over the management and policies of New Express Scripts than they currently exercise over the management and policies of Medco.

Failure to complete the mergers could negatively impact the stock prices, businesses and financial results of Express Scripts and Medco.

 

If the mergers are not completed, the ongoing businesses of Express Scripts and Medco may be adversely affected and Express Scripts and Medco will be subject to several risks and consequences, including the following:

 

 

 

 

In addition, if the mergers are not completed, Express Scripts and/or Medco may experience negative reactions from the financial markets and from their respective customers and employees. Express Scripts and Medco also could be subject to litigation related to a failure to complete the mergers or to enforce their respective obligations under the merger agreement. If the mergers are not consummated, Express Scripts and Medco cannot assure their respective stockholders that the risks described will not materially affect the business, financial results and stock prices of Express Scripts and/or Medco.

 

Express Scripts’ inability to satisfy and comply with conditions under its existing financing arrangements or raise additional or replacement financing could delay or prevent the completion of the mergers.

 

New Express Scripts’, Express Scripts’ and the Merger Subs’ obligations under the merger agreement are not subject to any conditions regarding their ability to finance, or obtain financing, for the transactions contemplated by the merger agreement, and they are obligated under the merger agreement to have sufficient funds available to satisfy their obligations under the merger agreement.

 

In addition to cash on hand, Express Scripts must raise a substantial amount of capital from third party sources to finance the transactions contemplated by the merger agreement. This financing may take any of several forms or any combination of them, including but not limited to the following: (i) Express Scripts may draw funds under the bridge facility; (ii) Express Scripts may issue senior notes in the public and/or private capital markets which would reduce availability of the bridge facility; and (iii) Express Scripts intends to borrow $4.0 billion under the term facility. See “Description of Financing” beginning on page 184.

 

The bridge credit agreement and the term/revolving credit agreement contain customary conditions to funding and require Express Scripts to maintain a maximum consolidated leverage ratio of 3.5 to 1.0 and a minimum interest coverage ratio of 3.5 to 1.0. There is a risk that these conditions or covenants will not be satisfied or complied with, as applicable, on a timely basis or at all. There is also a risk that one or more members of the lending syndicate will default on its obligations to provide its committed portion of the financing (and the commitments of any defaulting syndicate member cannot be replaced on a timely basis). There are a number of risks and uncertainties associated with the execution of a capital markets financing, particularly in light of recent volatility in the capital markets and economic factors affecting U.S. and global economies. All of these risks are magnified given the scale of financing required to consummate the transactions contemplated by the merger agreement. Any failure of Express Scripts to satisfy and comply with conditions under its existing financing arrangements or raise additional or replacement financing could delay or impede the closing of the mergers.

 

Following consummation of the mergers, the credit rating of Express Scripts and/or Medco could be downgraded, which may increase its borrowing costs and could give rise to an obligation to redeem existing indebtedness.

 

We currently anticipate that following the closing of the mergers, all eligible domestic subsidiaries of New Express Scripts will guarantee the indebtedness of New Express Scripts. By virtue of the transaction structure whereby Medco and Express Scripts will become wholly owned subsidiaries of New Express Scripts, absent further action, this would result in incremental debt at both Express Scripts (and its consolidated guarantor subsidiaries) and Medco (and its consolidated guarantor subsidiaries). New Express Scripts also expects to add its guarantee to the existing Express Scripts debt and Medco debt, such that substantially all outstanding indebtedness of New Express Scripts, Express Scripts and Medco would, as a credit matter, have the benefit of the earnings and credit support of the combined company. New Express Scripts will by reason of the debt incurred to finance the Medco merger consideration have considerably higher aggregate levels of indebtedness than Express Scripts and Medco currently have in the aggregate, and there can be no assurance that the credit ratings of the existing Express Scripts debt or Medco debt will not be subject to a downgrade below investment grade. On July 21, 2011, Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services assigned credit ratings of Baa3 and BBB+, respectively, to Express Scripts. On July 25, 2011, Fitch Ratings assigned a credit rating of BBB to Express Scripts. On July 25, 2011, Fitch Ratings assigned a credit rating of BBB to Medco.

 

In the event that the notes in an aggregate principal amount of $4.0 billion issued by Express Scripts under the indenture dated June 9, 2009, which we refer to as the Express indenture, receive a below investment grade rating from each of Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services and such downgrade constitutes a “below investment grade rating event” (as defined in the Express indenture) during the period continuing until 60 days after consummation of the mergers (subject to extension if the rating of the notes is under publicly announced consideration for possible downgrade by either of such rating agencies), each holder of the notes would have the right to require Express Scripts to repurchase all or part of such holder’s notes at a purchase price in cash equal to 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest, if any, on the notes repurchased, to the date of purchase and Express Scripts would likely be required to refinance such indebtedness. Additionally, in the event that the notes in an aggregate principal amount of $2.5 billion issued by Medco under the indenture dated March 18, 2008, which we refer to as the Medco indenture, are rated below their investment grade rating by each of Moody’s Investors Service, Inc., Fitch Ratings and Standard & Poor’s Rating Services and such downgrade constitutes a “below investment grade rating event” (as defined in the Medco indenture) on the 60th day

(subject to extension if the rating of the notes is under publicly announced consideration for possible downgrade by any such rating agency) following the Medco merger, then Medco would be required to offer to repurchase its notes at a repurchase price of 101% of the aggregate principal amount of the notes repurchased, plus accrued but unpaid interest. Any such obligation to offer to repurchase outstanding Express Scripts or Medco indebtedness, or both, could necessitate obtaining significant amounts of refinancing capital. No assurance can be given as to the terms or availability of refinancing capital. Any such obligation could have an adverse effect on New Express Scripts’ financial condition. Moreover, if a ratings downgrade were to occur or New Express Scripts fails to obtain an investment grade rating, even if such event does not give rise to a redemption obligation, the combined company could experience higher borrowing costs in the future and more restrictive covenants which would reduce profitability and diminish operational flexibility.

 

Express Scripts, Medco and New Express Scripts will incur significant transaction and merger-related transition costs in connection with the mergers.

 

Express Scripts and Medco expect that they and New Express Scripts will incur significant, non-recurring costs in connection with consummating the mergers and integrating the operations of the two companies. Express Scripts and Medco may incur additional costs to maintain employee morale and to retain key employees. Express Scripts and Medco will also incur significant fees and expenses relating to financing arrangements and legal, accounting and other transaction fees and other costs associated with the mergers. Some of these costs are payable regardless of whether the mergers are completed. Moreover, under specified circumstances, Express Scripts or Medco may be required to pay a termination fee of $950 million, $650 million or $227.5 million (depending on the specific circumstances) if the merger is not consummated. Express Scripts or Medco may also be required to reimburse the other party for its expenses, up to a maximum amount of either $225 million or $100 million (depending on the specific circumstances), in connection with the termination of the merger agreement. Notwithstanding the foregoing, in no event shall either party’s expenses or the full amount of the termination fee be paid to such party more than once, nor shall either party be paid an aggregate amount pursuant to the expense reimbursement and termination fee provisions of the merger agreement in excess of the full amount of the termination fee. See “The Merger Agreement — Termination Fees; Expenses” beginning on page 178.

 

The unaudited pro forma financial information included in this document may not be indicative of what New Express Scripts’ actual financial position or results of operations would have been.

 

The unaudited pro forma financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what New Express Scripts’ actual financial position or results of operations would have been had the mergers been completed on the dates indicated. The unaudited pro forma financial information reflects adjustments, which are based upon preliminary estimates, to allocate the purchase price to Medco’s net assets. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Medco as of the date of the completion of the mergers. In addition, subsequent to the closing date, there may be further refinements of the purchase price allocation as additional information becomes available. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma adjustments reflected in this document. See “Express Scripts and Medco Unaudited Pro Forma Condensed Combined Financial Information” for more information.

 

Several lawsuits have been filed against Medco, members of the Medco board, Express Scripts, New Express Scripts and the Merger Subs challenging the mergers, and an adverse ruling in such lawsuits may prevent the mergers from becoming effective or from becoming effective within the expected timeframe.

 

Medco, members of the Medco board, Express Scripts, New Express Scripts and the Merger Subs are named as defendants in lawsuits brought by and on behalf of Medco stockholders challenging the mergers, seeking, among other things, to enjoin the defendants from completing the mergers on the agreed-upon terms. See “The Mergers — Litigation Relating to the Mergers” for more information about these lawsuits.

One of the conditions to the closing of the mergers is that no order has been enforced, enacted or issued or is applicable to the mergers or other transactions contemplated by the merger agreement by any governmental entity which prohibits, restrains or makes illegal the consummation of the mergers or other transactions contemplated by the merger agreement. As such, if the plaintiffs are successful in obtaining an injunction prohibiting the defendants from completing the mergers on the agreed upon terms, then such injunction may prevent the mergers from becoming effective, or from becoming effective within the expected timeframe.

 

Express Scripts, Medco and, subsequently, the combined company must continue to retain, motivate and recruit executives and other key employees, which may be difficult in light of uncertainty regarding the mergers, and failure to do so could negatively affect the combined company.

 

For the mergers to be successful, during the period before the merger is completed, both Express Scripts and Medco must continue to retain, motivate and recruit executives and other key employees. Moreover, the combined company must be successful at retaining and motivating key employees following the completion of the mergers. Experienced employees in the industries in which Express Scripts and Medco operate are in high demand and competition for their talents can be intense. Employees of both Express Scripts and Medco may experience uncertainty about their future role with the combined company until, or even after, strategies with regard to the combined company are announced or executed. The potential distractions of the mergers may adversely affect the ability of Express Scripts, Medco or, following completion of the mergers, the combined company, to retain, motivate and recruit executives and other key employees and keep them focused on applicable strategies and goals. A failure by Express Scripts, Medco or, following the completion of the mergers, the combined company, to attract, retain and motivate executives and other key employees during the period prior to or after the completion of the mergers could have a negative impact on the business of Express Scripts, Medco or the combined company.

 

New Express Scripts will face intense competition in the pharmacy benefits management business.

 

New Express Scripts will operate in a very competitive industry, and competition could compress its margins and impair its ability to attract and retain clients. New Express Scripts’ failure to differentiate its products and services in the marketplace could magnify the impact of the competitive environment.

 

New Express Scripts will operate in an industry that is subject to significant market pressures brought about by customer demands, legislative and regulatory activity and other market factors. Competition in the marketplace has caused many pharmacy benefit management companies, which we refer to as PBMs, to reduce the prices charged to clients for core services and share a larger portion of rebates, formulary fees and related revenues received from pharmaceutical manufacturers with clients. This combination of lower pricing and increased revenue sharing, as well as increased demand for enhanced service offerings and higher service levels, puts pressure on operating margins, which have historically been offset by a variety of positive trends including lower drug purchasing costs, increased generic usage, drug price inflation and increased rebates. New Express Scripts’ failure or inability to maintain these positive trends, or identify and implement new ways to mitigate pricing pressures, could negatively impact its ability to attract or retain clients, or negatively impact its margins.

 

We believe the entities that will become the combined company’s clients upon closing are well informed and organized and can easily move between New Express Scripts and its competitors. These factors together with the impact of the competitive marketplace may make it difficult for New Express Scripts to retain existing clients, sell to new clients and cross-sell additional services to clients, which could materially adversely affect New Express Scripts’ business and financial results. This requires New Express Scripts to differentiate its business offerings by innovating and delivering products and services that demonstrate value to New Express Scripts’ clients, particularly in response to market changes from public policy. Further, the reputational impact of a service-related event, or New Express Scripts’ failure to innovate and deliver products

and services that demonstrate value to its clients, may affect New Express Scripts’ ability to retain or grow profitable clients which could have a material adverse effect on its financial results.

 

Government regulatory efforts, including efforts to reduce healthcare costs and alter healthcare financing practices, could lead to a decreased demand for New Express Scripts’ services or to reduced profitability.

 

During the past several years, the U.S. healthcare industry has been subject to an increase in governmental regulation at both the federal and state levels. Future governmental regulation could, directly or indirectly, have adverse consequences on the business and operations of New Express Scripts which are impossible to predict at present. Efforts to control healthcare costs, including prescription drug costs, are underway at the federal and state government levels. There have also been a number of recent proposals and enactments by the federal government and various states to reduce Medicare Part D and Medicaid reimbursement levels in response to budget problems. We expect other similar proposals in the future. Government efforts to reduce healthcare costs and alter healthcare financing practices could lead to a decreased demand for New Express Scripts’ services or to reduced profitability.

 

Adverse economic conditions could adversely affect New Express Scripts’ earnings and New Express Scripts’ results of operations.

 

The continuing, prolonged recessionary U.S. economic environment may continue to impact demand for, and utilization under, certain of New Express Scripts’ products and services, and New Express Scripts’ profitability with respect to such products and services. Adverse economic conditions have caused and could continue to cause employers to stop offering prescription benefit coverage as an employee benefit or elect to offer this coverage on a voluntary, employee-funded basis, or with higher member co-pays, as a means to reduce their operating costs. Together with higher unemployment and significant employment layoffs and downsizings, these conditions could lead to a loss of members and cause a reduction in utilization for New Express Scripts’ services. In addition, continued difficult economic conditions have caused and could continue to cause members to be unwilling or unable to spend the money necessary to have prescriptions filled or refilled as prescribed, which trend is exacerbated when plan sponsors move to plan designs with higher member co-pays. Further, lower volumes result in diseconomies of scale which reduce New Express Scripts’ profitability under certain products and services. As a result, New Express Scripts’ volumes, earnings, profitability and cash flows may decline.

 

Express Scripts and Medco are involved in arrangements with third parties that may restrict Express Scripts’ and Medco’s, and subsequently New Express Scripts’, ability to sell, market, promote and develop products in certain markets.

 

Express Scripts and Medco are each party to numerous co-promotion, development, licensing and other agreements and arrangements with third parties, some of which may contain provisions limiting Express Scripts’ or Medco’s ability to sell, market, promote and/or develop products in specified markets. Following the consummation of the transactions contemplated by the merger agreement, products previously marketed by either Express Scripts or Medco may become subject to these restrictions by virtue of the combination of the two companies under New Express Scripts. If it is determined that any of New Express Scripts’ products are subject to these restrictions, New Express Scripts may be required to divest, license or otherwise cease marketing these products in various geographic territories, potentially worldwide, and may or may not be entitled to retain passive revenue in connection with actions taken to comply with any such restriction. In the event any product captured by these restrictions as a result of the mergers contributes significantly to sales, the divesture of rights to market the product could have an adverse effect on New Express Scripts’ business, cash flows, results of operations, financial position and prospects.

New Express Scripts will have considerably higher levels of indebtedness than Express Scripts and Medco currently have, which will likely result in higher relative debt service costs and less cash flow from operations available to fund growth, stock repurchases and other corporate purposes.

 

The indebtedness of Express Scripts and Medco was approximately $4.0 billion for Express Scripts as of September 30, 2011 and approximately $5.0 billion for Medco as of September 24, 2011. Although the financing mix for the transactions contemplated by the merger agreement has not yet been determined, assuming such transactions are funded with $14.0 billion of new indebtedness, the combined company would have had pro forma indebtedness as of September 30, 2011, of approximately $19.8 billion.

 

Upon completion of the mergers, New Express Scripts will have incurred acquisition debt financing of up to $14.0 billion. On August 5, 2011, Express Scripts entered into a $14.0 billion unsecured bridge term loan facility. Prior to the consummation of the Express Scripts merger, Express Scripts is the borrower under the bridge facility. New Express Scripts will assume the role, rights and obligations of Express Scripts and become the borrower under the bridge credit agreement upon consummation of the Express Scripts merger. The bridge facility will be available for Express Scripts to pay a portion of the cash consideration in accordance with the merger agreement, to repay any existing indebtedness that will become due or otherwise default upon consummation of the mergers, and to pay related fees and expenses. On August 29, 2011, Express Scripts entered into a $5.5 billion permanent facility consisting of a five-year $4.0 billion term loan facility and a five-year $1.5 billion revolving loan facility. Prior to the consummation of the Express Scripts merger, Express Scripts is the borrower under the permanent facility. New Express Scripts will assume the role, rights and obligations of Express Scripts and become the borrower under the term/revolving credit agreement upon consummation of the Express Scripts merger. The term facility will be available for Express Scripts to pay a portion of the cash consideration in accordance with the merger agreement, to repay any existing indebtedness that will become due or otherwise default upon consummation of the mergers and to pay related fees and expenses. The revolving facility will be available for working capital needs and general corporate purposes. Upon entry into the term facility, the commitments under the bridge facility were automatically reduced by $4.0 billion.

 

This level of indebtedness will:

 

 

The covenants to which Express Scripts or New Express Scripts has agreed or may agree in connection with the financing, and New Express Scripts’ potential indebtedness and higher debt-to-equity ratio in comparison to that of Express Scripts or Medco on a recent historical basis, may have the effect, among other things, of restricting New Express Scripts’ financial and operating flexibility to respond to changing business and economic conditions, creating competitive disadvantages compared to other competitors with lower debt levels and increasing borrowing costs.

 

The market price for shares of New Express Scripts common stock may be affected by factors different from those affecting the market price for shares of Medco common stock and Express Scripts common stock.

 

Upon completion of the Medco merger, holders of Medco common stock and Express Scripts common stock will become holders of New Express Scripts common stock. Express Scripts’ business differs from that

of Medco, and accordingly the results of operations of the combined company will be affected by factors different from those currently affecting the results of operations of Medco and Express Scripts. For a discussion of the businesses of Express Scripts and Medco and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this joint proxy statement/prospectus and referred to under the section entitled “Where You Can Find More Information” beginning on page 208.

 

Government investigations involving Express Scripts or Medco, or New Express Scripts after completion of the mergers, could lead to the commencement of civil and/or criminal proceedings involving the imposition of substantial fines, penalties and injunctive or administrative remedies, including exclusion from government reimbursement programs, which could give rise to other investigations or litigation by government entities or private parties.

 

We cannot predict whether future or pending investigations to which Express Scripts or Medco, or New Express Scripts after completion of the mergers, may become subject would lead to a judgment or settlement involving a significant monetary award or restrictions on its operations. The pricing, sales and marketing programs and arrangements and related business practices of Express Scripts, Medco and other participants in the health care industry are under increasing scrutiny from federal and state regulatory, investigative, prosecutorial and administrative entities. These entities include the Department of Justice and its U.S. Attorneys’ Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission and various state Attorneys General offices. Many of the health care laws under which certain of these governmental entities operate, including the federal and state anti-kickback statutes and statutory and common law false claims laws, have been construed broadly by the courts and permit the government entities to exercise significant discretion. In the event that any of those governmental entities believes that wrongdoing has occurred, one or more of them could institute civil or criminal proceedings which, if resolved unfavorably, could subject Express Scripts or Medco, or New Express Scripts after completion of the mergers, to substantial fines, penalties and injunctive or administrative remedies, including exclusion from government reimbursement programs. In addition, an adverse outcome to a government investigation could prompt other government entities to commence investigations of Express Scripts or Medco, or, after completion of the mergers, New Express Scripts, or cause those entities or private parties to bring civil claims against it. We also cannot predict whether any investigations will affect marketing practices or sales. Any such result could have a material adverse impact on Express Scripts’ or Medco’s, or New Express Scripts’ after completion of the mergers, results of operations, cash flows, financial condition or business.

 

Regardless of the merits or outcomes of any investigation, government investigations are costly, divert management’s attention from our business and may result in substantial damage to our reputation. For additional information about these investigations, see the respective reports of Medco and Express Scripts described under “Where You Can Find More Information” beginning on page 208.

 

Pending and future litigation or other proceedings could subject New Express Scripts to significant monetary damages or penalties and/or require New Express Scripts to change its business practices, either of which could have a material adverse effect on the business operations and future financial results or condition of New Express Scripts.

 

New Express Scripts will be subject to risks relating to litigation, regulatory proceedings and other similar actions in connection with its business operations, including the dispensing of pharmaceutical products by its home delivery pharmacies, services rendered in connection with its disease management offerings and its pharmaceutical services operations. Following the mergers, New Express Scripts could be liable for those proceedings pending against Express Scripts or Medco as disclosed in Express Scripts’ Annual Report on Form 10-K for the year ended December 31, 2010 and Medco’s Annual Report on Form 10-K for the year ended December 25, 2010 and in each of Express Scripts’ Quarterly Reports on Form 10-Q for the quarters ended September 30, 2011 and June 30, 2011 and Medco’s Quarterly Reports on Form 10-Q for the quarters ended September 24, 2011 and June 25, 2011, each of which is on file with the SEC and all of which are incorporated by reference into this proxy statement/prospectus. If one or more of these proceedings has an unfavorable outcome, New Express Scripts cannot provide any assurance that it would not have a material

adverse effect on its business and financial results, including its ability to attract and retain clients as a result of the negative reputational impact of such an outcome. Further, while certain costs are covered by insurance, New Express Scripts may incur uninsured costs that are material to its financial performance in the defense of such proceedings.

 

There are other legal matters in which adverse outcomes could negatively affect New Express Scripts’ results of operations, cash flows, financial condition or business.

 

Unfavorable outcomes in other pending litigation matters, or in future litigation, including litigation concerning product pricing, securities law violations, product liability claims, matters relating to the Employee Retirement Income Security Act of 1974, as amended (which we refer to as ERISA), patent and intellectual property disputes, and antitrust matters could preclude the commercialization of products, negatively affect the profitability of existing products and subject New Express Scripts to substantial fines, penalties and injunctive or administrative remedies, including exclusion from government reimbursement programs. Any such result could materially and adversely affect New Express Scripts’ results of operations, cash flows, financial condition or business.

 

Further, aggressive plaintiffs counsel often file litigation on a wide variety of allegations whenever there is media attention or negative discussion about the efficacy or safety of a product and whenever the stock price is volatile; even when the allegations are groundless, we may need to expend considerable funds and other resources to respond to such litigation. For further information on material legal matters facing Express Scripts and Medco see the reports described under “Where You Can Find More Information” beginning on page 208.

 

Changes in laws and regulations could adversely affect our business and the business of New Express Scripts.

 

All aspects of our respective businesses, and consequently the business of New Express Scripts, including pharmacy benefits management, manufacturing, marketing, pricing, sales, litigation and intellectual property rights are, or in the case of New Express Scripts, will be, subject to extensive legislation and regulation. Changes in applicable federal and state laws and agency regulations, as well as the laws and regulations of foreign jurisdictions, could have a material adverse effect on our respective businesses, and consequently the business of New Express Scripts.

 

Additional Risks Relating to Express Scripts, Medco and New Express Scripts after the mergers.

 

Express Scripts’ and Medco’s businesses are, and will continue to be, subject to the risks described in (i) Part I, Item 1A in Express Scripts’ Annual Report on Form 10-K for the year ended December 31, 2010, (ii) Part I, Item 1A in Medco’s Annual Report on Form 10-K for the year ended December 25, 2010, (iii) Part II, Item 1A in Express Scripts’ Quarterly Reports on Form 10-Q for the quarters ended September 30, 2011 and June 30, 2011, (iv) Part II, Item 1A in Medco’s Quarterly Reports on Form 10-Q for the quarters ended September 24, 2011 and June 25, 2011 and (v) Exhibit 99.1 to Medco’s Current Report on Form 8-K filed on July 21, 2011, in each case, as filed with the SEC and incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 208 for the location of information incorporated by reference in this joint proxy statement/prospectus.

 

The unaudited pro forma condensed combined financial information presented below is derived from the historical financial statements of Express Scripts and Medco, adjusted to give effect to the mergers. For a summary of the mergers, see the section of this joint proxy statement/prospectus entitled “The Mergers.”

 

The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2011 and for the year ended December 31, 2010 give effect to the mergers as if they had occurred on the first day of the earliest period presented. The unaudited pro forma condensed combined balance sheet gives effect to the mergers as if they had occurred on September 30, 2011.

 

The pro forma adjustments are preliminary and have been made solely for informational purposes. The actual results reported by the combined company in periods following the mergers may differ significantly from that reflected in these pro forma financial statements for a number of reasons, including but not limited to cost savings from operating efficiencies, synergies and the impact of the incremental costs incurred in integrating the two companies. As a result, the pro forma information is not intended to represent and is not necessarily indicative of what the combined company’s financial condition or results of operations would have been had the mergers been completed on the applicable dates of this pro forma financial information. In addition, the pro forma financial information does not purport to project the future financial condition and results of operations of the combined company.

 

The unaudited pro forma condensed combined financial information is based upon the historical financial statements of Express Scripts and Medco. The pro forma financial statements are based on various assumptions, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from Medco based on preliminary estimates of fair value. The pro forma assumptions and adjustments are described in the accompanying notes presented on the following pages. Pro forma adjustments are those that are directly attributable to the transaction, are factually supportable and, with respect to the unaudited pro forma statement of operations, are expected to have a continuing impact on the consolidated results. The final purchase price and the allocation thereof will differ from that reflected in the pro forma financial statements after final valuation procedures are performed and amounts are finalized following the completion of the mergers.

 

The unaudited pro forma condensed combined financial information does not reflect any cost savings from operating efficiencies, synergies or other restructurings that could result from the mergers.

Unaudited Pro Forma Condensed Combined Balance Sheet
September 30, 2011