OPTIONS PLAYS
Drug-benefits manager Express Scripts has enriched its senior executives by awarding them options at unusually opportune times, according to public documents reviewed by The Post.
The revelation of suspicious options activity comes as Express Scripts publicly blasts Caremark execs for taking “sweetheart” payouts in conjunction with its $24.6 billion merger with CVS.
Express Scripts is battling to win support for its $26 billion hostile bid for Caremark before shareholders vote on the marriage with CVS on Feb. 20.
The benefits manager is expected to announce positive earnings today, which could boost its stock price and sweeten the value of its offer for Caremark.
Meanwhile, CVS is exploring the possibility of raising its offer in order to preempt any jump in Express Scripts’ stock price, sources said.
The suspicious options grants, which could throw a wrench in Express Scripts’ plan of attack, came about three months after it named former accountant George Paz chairman and CEO in December 2004. Up until then, the company typically granted options to executives two weeks after its annual earnings announcement.
But for fiscal 2004, Express Scripts decided to award 56,411 options exercisable at $77.28 to Paz and other executives before it announced earnings, according to public filings.
One day after that grant, the company announced positive earnings that drove the stock up to $84.50 – giving Paz and other executives a two-day gain of more than $407,000.
A year later, Express Scripts reversed course and granted the options after the earnings announcement. But this time, the company reported negative earnings, which dragged shares down $5.31 to $88.60.
Eight days later, Paz and other executives were awarded 143,222 stock-appreciation rights at an exercise price of $87.27, according to public filings. By waiting until the stock fell before granting the options, Paz and the others avoided a loss of nearly $1 million.
“It is suspicious that these guys were so lucky so often,” said Greg Taxin, chief executive of proxy adviser Glass Lewis.
