UPDATE, 10:59 a.m. Monday:

Caremark issued a brief response to the Express Scripts overture this morning in which the company says it "continues to be bound by the terms of the merger agreement" with CVS and that the parties expect to file a joint proxy statement with the Securities & Exchange Commission shortly.

The statement continued: "Caremark's Board of Directors will review the terms of the proposal submitted by Express Scripts in a manner consistent with its obligations under the CVS merger agreement and applicable Delaware law." Caremark, like many other companies, is incorporated under Delaware law although it is based in Nashville.

AS ORIGINALLY POSTED:

Pharmacy benefit provider Express Scripts has launched a hostile takeover bid for Caremark Rx, Nashville's largest publicly traded company. The St. Louis-based bidder is offering a total of $26 billion in cash and stock -- roughly $5 billion more than drugstore chain CVS has on the table in a merger announced last month.

Express Scripts CEO George Paz made the offer in a letter to Caremark CEO Mac Crawford that was posted publicly in the wee hours of Monday morning. The letter notes that the buyout offer is 15 percent above what CVS has offered and 22 percent above the recent average trading price of Caremark's stock.

Express Scripts has engaged Citigroup Corporate and Investment Banking and Credit Suisse as financial advisors for its offer, which entails essentially half cash and half stock. A significant debt offering would fund the cash portion. The company has retained the New York law firm Skadden Arps to represent it in the offer and says it is prepared to launch a proxy contest if necessary.

News of the Caremark-CVS deal met with distinct skepticism from some quarters when the companies announced their plans in early November, and a competing bid had been seen in the markets as a possibility. Few spectators, however, expected that any direct competitor of Caremark could muster a leveraged buyout on the scale Express now proposes.

Caremark and CVS had announced plans that would make Nashville the home of a pharmacy benefit subsidiary while placing ultimate corporate authority in CVS's hometown of Woonsocket, R.I.

This morning's New York Times offers a comprehensive analysis of why Express Scripts would make a rival offer for Nashville's Caremark at this time -- and how this gambit brings back memories of the age of Gordon Gekko.

Nashville has not seen a hostile takeover on such a scale for a generation. The last comparable transaction was the protracted courtship between hometown insurer National Life and Texas-based American General, each of which tried to buy the other before the Houston firm prevailed in a 1982 deal then valued at some $1.5 billion.