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CVS rejects Rite Aid unit
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February 25, 2000: 12:28 p.m. ET
Drug chain quells report it's buying benefits management business
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NEW YORK (CNNfn) - CVS Corp. said Friday that it does not plan to buy PCS Health Systems from Rite Aid Corp., quashing media reports that the two drugstore chains were near a deal on Rite Aid's benefits management business.
The deal would have provided Rite Aid (RAD: Research, Estimates) with cash to help it work through serious financial problems, but was expected to have fallen short of the $1.5 billion Rite Aid paid for the business in November 1998.
CVS spokesman Todd Andrews declined comment.
Rite Aid spokeswoman Karen Rugen also declined comment on the announcement, but reiterated that PCS is for sale, and that it is in discussions with several potential buyers. She declined to name any of them, however.
Woonsocket, R.I.-based CVS (CVS: Research, Estimates), the biggest U.S. operator of drug stores with more than 4,000 nationwide, was expected to pays between $800 million and $1 billion for PCS, according to published reports.
Based in Scottsdale, Ariz., PCS is the nation's second-largest pharmacy benefits manager (PBM), administering benefits to more than 50 million people and processing more than 300 million prescriptions each year.
Rite Aid, which has been trying to sell PCS since last fall, said previously it had received offers of more than $1.5 billion for the business.
Philip Muldoon, an analyst with McDonald Investments Inc., said selling the PCS business is the only meaningful option Rite Aid has to raise capital. The only question is whether the company can get back it's $1.5 billion, Muldoon said.
CVS shares edged up 1/16 to 37-1/16 Friday while Rite Aid shares slipped 1-3/4 to 7-1/4. 
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