Caremark Rx Inc.'s (NYSE:CMX) deal with CVS Corp. (NYSE:CVS) unfairly favors company insiders, according to a shareholder lawsuit brought to court by shareholders attempting to block the merger. Shareholders were also infuriated earlier this month when the company's board voted unanimously to block a higher, rival offer from pharmacy benefit manager Express Scripts Inc. (NDAQ:ESRX).

What's so unusual about this deal? Well, first of all, the Caremark-CVS deal has a whopping $675 million breakup fee - much larger than that of many large PE buyouts that took place recently. Secondly, Caremark executives and directors would also receive lucrative director positions at the combined company and could use the company's sale to free themselves from possible penalties and fines from an investigation by the Securities and Exchange Commission into potential backdating of stock options. In fact, CEO Edwin 'Mac' Crawford Thirdly stands to gain $48 million in stock, severance payments and consulting fees as part of the CVS deal. Finally, while the CVS offer is for stock in the company, and the Express Scripts offer was for stock plus a cash premium to shareholders. This is not to mention that the entire transaction took place near the stock's 52-week low, which is highly suspect.

Clearly there are plenty of reasons for concern. Lawyer Stuant Grant said it best: "Our main gripe is this was a sweetheart deal that gave the insiders a lot more than the outsiders". Whether or not this can be successfully resolved depends largely on the sentiment of larger institutional shareholders.