Item 1.01 Entry into a Material Definitive Agreement.
Explanatory Note
As previously announced, on March 1, 2017, McKesson Corporation (the "Company")
and Change Healthcare Inc. (formerly HCIT Holdings, Inc.), a Delaware
corporation ("Change"), completed certain transactions whereby the majority of
McKesson's Technology Solutions segment and substantially all of Change
Healthcare Performance, Inc.'s (formerly Change Healthcare, Inc.) legacy
business were contributed to Change Healthcare LLC, a Delaware limited liability
company ("Change Healthcare"), resulting in the establishment of a joint venture
(the "Joint Venture Transactions").
On February 10, 2020, the Company issued a press release announcing the
commencement of its exchange offer (the "Exchange Offer") related to the
separation of the Company's interest in Change Healthcare. The separation is
being effected in connection with the merger of PF2 SpinCo, Inc. ("SpinCo"), a
Delaware corporation and a wholly owned subsidiary of the Company, and Change
(the "Merger"). As previously announced, in connection with the consummation of
the Joint Venture Transactions, the Company, SpinCo and Change entered into a
number of agreements, including the Merger Agreement dated as of December 20,
2016 (the "Merger Agreement"), pursuant to which, among other things,
immediately following the consummation of the Exchange Offer (and any required
clean-up spin-off distribution as described below), SpinCo will merge with and
into Change, with Change as the surviving company. The separation transactions
described in this Current Report on Form 8-K are collectively referred to herein
as the "Transactions".
In the Exchange Offer, the Company is offering the holders of its common stock,
par value $0.01 per share (the "McKesson Common Stock"), the option to exchange
their shares of McKesson Common Stock for shares of SpinCo's common stock, par
value $0.001 per share (the "SpinCo Common Stock"). SpinCo will hold all of the
Company's interest in Change Healthcare prior to the consummation of the
Exchange Offer. If the Exchange Offer is not fully subscribed because less than
all shares of SpinCo Common Stock owned by the Company are exchanged, or if the
Exchange Offer is consummated but not all of the shares of SpinCo Common Stock
owned by the Company are exchanged, the remaining shares of SpinCo Common Stock
owned by the Company will be distributed in a clean-up spin-off (the "Spin-off"
and, together with the exchange offer, the "Distribution") on a pro rata basis
to holders of McKesson Common Stock whose shares of McKesson Common Stock remain
outstanding after consummation of the Exchange Offer.
Immediately following the Distribution, all shares of SpinCo Common Stock will
be converted into an equal number of shares of common stock of Change, par value
$0.001 (the "Change Common Stock"), in the Merger. After the completion of the
Merger, Change Healthcare will be a wholly-owned subsidiary of Change, and the
holders of McKesson Common Stock who participate in the Exchange Offer or who
receive SpinCo Common Stock in the Spin-off, if applicable, will own
approximately 51% of the Change Common Stock on a fully-diluted basis.
The Distribution is intended to be executed via a tax-free distribution of
SpinCo Common Stock to holders of McKesson Common Stock for U.S. federal income
tax purposes. The Merger is intended to qualify as a "reorganization" for U.S.
federal income tax purposes.
The Separation Agreement
On February 10, 2020, in connection with the commencement of the Exchange Offer,
the Company, SpinCo, Change, Change Healthcare (and certain of its affiliates),
entered into a Separation and Distribution Agreement (the "Separation
Agreement"), which provides the material terms for the Distribution.
Subject to the terms and conditions of the Separation Agreement, prior to
consummating the Distribution and completing the Merger, to the extent not
already completed, the Company will transfer to SpinCo all of its direct or
indirect interest in Change Healthcare. In addition, the Company will commence
the Exchange Offer and, to the extent that any shares of SpinCo Common Stock are
not exchanged in the Exchange Offer, after giving effect to the Exchange Offer,
the Company will distribute the remaining shares of SpinCo Common Stock on a pro
rata basis to the holders of outstanding shares of McKesson Common Stock in the
Spin-off. The Company, in its sole discretion, will determine the terms of the
Exchange Offer, including the number of shares of SpinCo's Common Stock that
will be offered for each share of McKesson Common Stock.
The Separation Agreement also sets forth other agreements between the Company,
SpinCo and Change related to the transactions, including provisions concerning
the termination and settlement of intercompany accounts and financial
instruments and the resignation of Company personnel from SpinCo prior to the
Distribution. The Separation Agreement also sets forth agreements that govern
certain aspects of the relationship between the Company and Change after the
Distribution, including provisions with respect to litigation, access to
information, confidentiality and dispute resolution.
--------------------------------------------------------------------------------
The Separation Agreement requires the Company to indemnify Change against losses
arising from, among other things, (i) any liabilities of the Company (other than
liabilities of Change Healthcare or arising out of ownership of Change
Healthcare) (ii) any of the Company's financial instruments, (iii) breaches by
the Company of the Separation Agreement, (iv) any liabilities of SpinCo and its
subsidiaries arising before (or based on facts occurring before) the
Distribution, (v) any indemnification claims of officers or directors of the
Company and its subsidiaries (including SpinCo, prior to the Distribution) and
(vi) the failure of the consummation of the Merger to occur immediately
following the Distribution as a result of a breach of the Merger Agreement by
the Company or SpinCo. The Separation Agreement requires Change to indemnify the
Company against losses arising from, among other things, (i) any liabilities of
Change Healthcare or arising out of ownership of Change Healthcare,
(ii) breaches by SpinCo of the Separation Agreement following the Merger and
(iii) the failure of the consummation of the Merger to occur immediately
following the Distribution as a result of a breach of the Merger Agreement by
Change. The Company is also required to indemnify Change for losses arising from
any material misstatements or omissions in SEC filings required in connection
with the Transactions to the extent such misstatements or omissions were not
based on information furnished by Change.
Tax Matters Agreement
Pursuant to the Separation Agreement, the Company, SpinCo and Change will enter
into a Tax Matters Agreement as of the effective date of the Distribution. The
Tax Matters Agreement will govern the rights, responsibilities and obligations
of the Company and SpinCo after the Transactions with respect to tax liabilities
and benefits, tax attributes, tax contests and other tax sharing regarding U.S.
federal, state and local, and non-U.S., taxes, other tax matters and related tax
returns. In addition, the Tax Matters Agreement could restrict Change's ability
to enter into certain change of control or other transactions involving Change's
equity if such transactions could implicate the tax-free status of the
Distribution. To the extent the Distribution does not qualify as a tax-free
transaction as a result of Change's failure to comply with the Tax Matters
Agreement, Change will be required to indemnify the Company, and in certain
circumstances the Tax Matters Agreement may require that Change enter into a new
tax receivable agreement pursuant to which it will be required to pay to the
Company 85% of the cash tax savings, if any, arising from the utilization of
certain tax basis increases resulting from the Distribution.
The Distribution is subject to the satisfaction or waiver of certain conditions,
including that the registration statement on Form S-4 and S-1 (File No.
333-236236) filed by SpinCo (the "SpinCo Registration Statement") with the
Securities and Exchange Commission (the "SEC") in connection with the
Distribution and the registration statement on Form S-4 (File No. 333-236234)
filed by Change (together with the SpinCo Registration Statement, the
"Registration Statements") with the SEC in connection with the Merger will each
be declared effective by the SEC, that the Merger Agreement be in full force and
effect at the time of the Distribution, that all the conditions to the Merger
have been satisfied or waived, and the other conditions described more fully in
the Registration Statements. The Merger is also subject to the satisfaction or
waiver of certain conditions, including that the Distribution has been
consummated, the receipt by the Company, on the one hand, and Change, on the
other hand, of opinions from their respective counsel relating to the treatment
of the distribution and the merger for U.S. federal income tax purposes, and the
other conditions described more fully in the Registration Statements.
The foregoing description of the Separation Agreement (including the Tax Matters
Agreement) does not purport to be complete and is subject to, and qualified in
its entirety by, the full text of the Separation Agreement (including the form
of Tax Matters Agreement included therein), which is filed as Exhibit 2.1 to
this Current Report on Form 8-K, and which is incorporated herein by reference.
Item 8.01 Other Events.
On February 10, 2020, the Company issued a press release announcing the
commencement of the Exchange Offer. A copy of the press release is filed as
Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by
reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
2.1 Separation and Distribution Agreement by and between McKesson
Corporation, PF2 SpinCo, Inc., Change Healthcare Inc., Change
Healthcare LLC, Change Intermediate Holdings, LLC and Change
Healthcare Holdings, LLC (including form of Tax Matters Agreement)
99.1 Press release issued by the McKesson Corporation dated
February 10, 2020.
104 Cover Page Interactive Data File - the cover page iXBRL tags are
embedded within the Inline XBRL document
--------------------------------------------------------------------------------
Forward-Looking Statements
This communication contains certain statements about the Company, SpinCo and
Change that are "forward-looking statements" within the meaning of Section 27A
of the United States Securities Act of 1933, as amended, and Section 21E of the
United States Securities Exchange Act of 1934, as amended. These matters involve
risks and uncertainties as discussed in the Company's and Changes's respective
periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K,
filed from time to time with the SEC. The forward-looking statements contained
in this communication may include statements about the expected effects on the
Company, SpinCo and Change of the separation of SpinCo from the Company and the
merger of SpinCo with and into Change (collectively, the "Transactions"); the
anticipated benefits of the Transactions and the Company's, SpinCo's and
Change's anticipated financial results; and also include all other statements in
this communication that are not historical facts. Without limitation, any
statements preceded or followed by or that include the words "targets," "plans,"
"believes," "expects," "intends," "will," "likely," "may," "anticipates,"
"estimates," "projects," "should," "would," "could," "positioned," "strategy,"
"future," or words, phrases, or terms of similar substance or the negative
thereof, are forward-looking statements. These statements are based on the
current expectations of the management of the Company, SpinCo and Change (as the
case may be) and are subject to uncertainty and to changes in circumstances and
involve risks and uncertainties that could cause actual results to differ
materially from those expressed or implied in such forward-looking statements.
In addition, these statements are based on a number of assumptions that are
subject to change. Such risks, uncertainties and assumptions include, but are
not limited to: changes in the healthcare industry and regulatory environment;
fluctuations in foreign currency exchange rates; material adverse resolution of
pending legal proceedings, including those related to the distribution of
controlled substances; cyberattack, natural disaster, or malfunction of
sophisticated internal computer systems to perform as designed; the potential
inadequacy of insurance to cover property loss or liability claims; the
satisfaction of the conditions to the Transactions and other risks related to
the completion of the Transactions and actions related thereto; the Company's
and Change's ability to complete the Transactions on the anticipated terms and
schedule, including the ability to obtain regulatory approvals; the anticipated
tax treatment of the Transactions and related transactions; the expansion and
growth of Change's operations; ongoing risks related to the price or trading
volume of Change's common stock; failure to pay dividends to holders of Change's
common stock; impairment charges for goodwill; and the risk that disruptions
from the Transactions will harm the Company's, SpinCo's or Change's businesses.
However, it is not possible to predict or identify all such factors.
Consequently, while the list of factors presented here is considered
representative, no such list should be considered to be a complete statement of
all potential risks and uncertainties. Unlisted factors may present significant
additional obstacles to the realization of forward-looking statements.
Forward-looking statements included herein are made as of the date hereof, and
none of the Company, SpinCo or Change undertakes any obligation to update
publicly such statements to reflect subsequent events or circumstances.
Important Notices and Additional Information
In connection with the Transactions, the Company has filed with the SEC a
Schedule TO with respect to the exchange offer, SpinCo has filed with the SEC a
registration statement on Form S-4 and Form S-1 containing a prospectus of
SpinCo relating to the exchange offer, and Change has filed with the SEC a
registration statement on Form S-4 relating to the Transactions. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THESE DOCUMENTS AND ANY AMENDMENTS TO THESE
DOCUMENTS WHEN THEY BECOME AVAILABLE, AS WELL AS ANY OTHER RELEVANT DOCUMENTS,
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, SPINCO AND CHANGE
AND THE TRANSACTIONS. Investors and security holders may obtain these materials
and other documents filed with the SEC free of charge at the SEC's website,
www.sec.gov. In addition, copies of these materials may be obtained free of
charge by accessing the Company's website at www.mckesson.com, or from Change by
accessing Change's website at www.changehealthcare.com.
To obtain copies of the exchange offer prospectus and related documents, or for
questions about the exchange offer or how to participate, please visit the
website that the Company will maintain for the exchange offer at
www.dfking.com/McKesson or contact the information agent, D.F. King & Co., at
1-866-304-5477 (toll-free in the United States) and 1-212-269-5550 (outside of
the United States).
None of the Company, SpinCo, Change or their respective directors or officers
makes any recommendation as to whether any stockholder of the Company should
participate in the exchange offer. This communication is for informational
purposes only and shall not constitute an offer to sell or the solicitation of
an offer to sell or the solicitation of an offer to buy any securities, nor
shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offer of securities shall
be made except by means of a prospectus meeting the requirements of Section 10
of the Securities Act of 1933, as amended.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses
MCKESSON CORPORATION 
