Truffle-hunting on Medco deal…

July 21, 2011

We’re guessing that the folks at Express Scripts (ESRX) and Medco Health Solutions (MHS) must not realize that today is Thursday. How else to explain why such a big deal — the $29.1 billion acquisition of Medco — is being announced today instead of on a Monday, when most big deals are announced?

We won’t go into the details, or even Medco’s earnings, which were also announced today since there are plenty of other places to find that news. See here for the news story and here for this morning’s conference call that Shira Ovide at the WSJ live-blogged.

Every time a big deal is announced, we here at footnoted like to go hunting for truffles. But instead of spending our time in the hills of Tuscany or the South of France, we turn to the much-more exciting (not to mention visually stimulating) EDGAR database.

It didn’t take us very long to find this 8-K that Medco filed nearly two months ago. The filing is actually a hodge-podge of seemingly routine housekeeping that practically screams “boring, routine crap. Don’t waste your valuable time reading me”. Indeed, that was our first reaction when we did read the filing back when it was filed on May 26.

It’s only after a closer examination this morning that the truffle begins to materialize in the woods. One of the seemingly routine items in the filing is the extension of Medco Chairman and CEO David Snow Jr’s employment agreement. Attached as Exhibit 10.1 and very short, it simply states that Snow’s employment is extended to March 31, 2015 from March 31, 2012.

Indeed, it’s only in light of the news that we find ourselves wondering why Snow’s agreement needed to be extended for three years nearly 10 months before it was set to expire. We won’t know when Express Scripts started talking to Medco until the S-4 and/or merger proxy are filed, when, just like Warren Buffett, we dive into the Background of the Deal. But we’ll go out on a limb here and say that it was probably sometime this spring, before Snow’s letter was drafted.

A quick look at Medco’s proxy reveals that Snow stands to make just over $30 million following a change in control. So the idea that he wanted to make sure all the i’s were dotted and t’s crossed doesn’t seem so far-fetched.

While we haven’t done much truffle hunting in real life — though we have taken a few walks with Wildman Steve Brill — we know that sometimes truffles aren’t immediately apparent and that you have to pick up leaves and such to really find the good stuff. That’s clearly the case with this May 26 filing.

Image source:Area Daily

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