This excerpt taken from the CVS 8-K filed Feb 13, 2007.
Pro Forma Analysis
In order to evaluate the estimated ongoing impact of the merger, Lehman Brothers analyzed the pro forma earnings effect of the merger from the perspective of CVS stockholders, after taking into account the payment of the Caremark special cash dividend and the accelerated share repurchase. For the purposes of this analysis, Lehman Brothers assumed (1) an exchange ratio of 1.67 shares of CVS common stock for each share of Caremark common stock acquired pursuant to the merger, (2) a $32.91 per share price for CVS common stock (the closing market price per share on February 9, 2007), (3) financial forecasts for each company from management of CVS and Caremark, (4) annual cost savings and synergies from the transaction of $170 million in the last three quarters of 2007 and $500 million of in 2008, as determined by the management of CVS, (5) the retirement of 150 million shares pursuant to the accelerated share repurchase and the incurrence of approximately $5 billion of additional debt in connection with the accelerated share repurchase, and (6) the incremental incurrence of $1.7 billion of transaction debt in connection with payment of the Caremark special cash dividend. Lehman Brothers estimated, based on the assumptions described above, and excluding certain non-recurring transaction costs incurred in connection with the merger, the pro forma impact of the transaction on the earnings per share of CVS would be dilutive in 2007 and accretive in 2008. Lehman Brothers analysis assumed that Caremark contributed to the combined companys financial results for nine months in 2007. The financial forecasts that underlie this analysis are subject to substantial uncertainty and, therefore, actual results may be substantially different.