UPDATE 5-Court halts Wal-Mart ex-exec from joining CVS

* Former Wal-Mart exec named president of CVS/pharmacy

* Hiring violates a noncompete agreement -Wal-Mart lawsuit

* Exec Mullany oversaw more than 1,300 Wal-Mart stores

* CVS shares rise 1.4 percent
(Recasts, updates with judge issuing restraining order)

NEW YORK/WILMINGTON, Del., Dec 3 (BestGrowthStock) – CVS Caremark
Corp (CVS.N: ) named a recent Wal-Mart Stores Inc (WMT.N: )
executive as the president of its retail pharmacy business, but
a judge temporarily blocked him from taking the job due to a
noncompete agreement with Wal-Mart.

Wal-Mart’s lawsuit seeks to bar the appointment of Hank
Mullany, who served as president of the discount retailer’s
northern U.S. division until Nov. 5. In the lawsuit against CVS
and Mullany, filed in Delaware Chancery Court late on Thursday,
Wal-Mart said the move would violate the noncompete agreement.

The hiring battle comes as Wal-Mart tries to compete more
directly with retailers such as CVS by opening smaller stores
of its own.

“Certainly Wal-Mart is one of their biggest competitive
threats on the retail side, I think, both on the pharmacy side
and somewhat less on the front end,” Morningstar analyst
Matthew Coffina said of CVS. “With this talk of Wal-Mart moving
to a smaller format with urban stores, that competitive threat
will probably increase.”

CVS said the lawsuit is without merit, and that Mullany’s
agreement with Wal-Mart should not prevent him from working for
the drugstore chain.

CVS is seeking to employ Mullany as of Dec. 6, but Delaware
judge Travis Laster granted a temporary restraining order
preventing Mullany from working for CVS until a Dec. 15 court
hearing.

Wal-Mart said it was suing to enforce the noncompete
agreement and prevent Mullany’s employment with CVS, one of the
largest U.S. pharmacy chains along with Walgreen (WAG.N: ).

Mullany did not respond to a request for comment.

As a Wal-Mart executive vice president, Mullany oversaw
more than 1,300 stores in 19 states, the lawsuit says. He was
also overseeing the company’s push into urban and rural markets
by opening stores that are less than one-fifth the size of its
traditional format.

“Mullany’s extensive and intimate knowledge of Walmart’s
highly secret business strategies will necessarily be used and
disclosed during his employment by CVS, and indeed, may have
been why CVS hired him in the first place,” said the
complaint.

Former Wal-Mart general counsel Robert Rhoads said the
company’s philosophy was to always try to negotiate a deal
before filing a lawsuit.

But when it comes to executive poaching, if a settlement is
not possible, then the company must send a message to
competitors that it will not hesitate to enforce its rights,
said Rhoads, who left the company in 2002.

“If someone threatens you, the first thing you do is call
up and say: ‘What’s up with this,'” Rhoads said. “But it
doesn’t mean you roll over.”

If Mullany joins CVS he would take over a unit that has
been the industry leader in pharmacy retail, Coffina said. The
company has been slowed in recent years by its underperforming
pharmacy benefits manager business, which administers
prescription drug benefits for employers and health plans.

Wal-Mart, the world’s largest retailer, has also struggled
with increased competition from lower-priced dollar stores in
the sluggish economy and is hoping to rebound after six
straight quarters of falling sales.

Mullany would succeed Larry Merlo, who was promoted to
president of CVS Caremark and is due become the chief executive
when current CEO Tom Ryan steps down.

Coffina added it would have reflected better on CVS if the
company had hired someone from within its own ranks.

“In general, you’d rather see them building up people
within the CVS culture,” he said. “But that said, he certainly
has a fair amount of relevant experience that he would be good
in that role.”

CVS shares rose 1.4 percent to close at $32.42 on Friday.

The case is Wal-Mart Stores Inc v Harry J. Mullany III and
CVS Caremark Corp, Delaware Chancery Court, No. 6040.
(Reporting by Tom Hals and Dan Levine; additional reporting by
Jon Lentz; editing by Lisa Von Ahn, Dave Zimmerman, Andre
Grenon and David Gregorio)

UPDATE 5-Court halts Wal-Mart ex-exec from joining CVS