Change Healthcare : Additional proxy soliciting materials - definitive

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

	SCHEDULE 14A
	Proxy Statement Pursuant to Section 14(A) of the
	Securities Exchange Act of 1934
☒ Filed by the Registrant	☐ Filed by a party other than the Registrant
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• Preliminary Proxy Statement
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• Soliciting Material under §240.14a-12

CHANGE HEALTHCARE INC.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 7, 2021

Change Healthcare Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-38961	82-2152098
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)
	424 Church Street, Suite 1400
	Nashville, Tennessee 37219
	(Address of Principal Executive Offices) (Zip Code)
	[phone]
	(Registrant's Telephone Number, Including Area Code)
	Not Applicable
	(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

• Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
• Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
• Pre-commencementcommunications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
• Pre-commencementcommunications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading	Name of each exchange
Symbol(s)	on which registered
Common Stock, par value $0.001 per share		CHNG		The Nasdaq Stock Market LLC
6.00% Tangible Equity Units	CHNGU	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 8.01 Other Events.

The following disclosures supplement the disclosures contained in the definitive proxy statement on Schedule 14A (the "Proxy Statement"), dated March 5, 2021, which was filed by Change Healthcare Inc. ("Change" or "Change Healthcare") with the U.S. Securities and Exchange Commission (the "SEC") and mailed on or about March 5, 2021 to Change stockholders of record as of the close of business on February 26, 2021, in connection with the previously announced proposed acquisition of Change by UnitedHealth Group Incorporated ("UnitedHealth Group" and the proposed acquisition, the "Transaction").

Following the announcement of the Transaction, as of the date of this Current Report on Form 8-K, nine lawsuits challenging the Transaction have been filed. The first lawsuit, a putative class action captioned Krueger v. Change Healthcare Inc., et al., was filed in Tennessee Chancery Court, Davidson County, on February 24, 2021 and voluntarily dismissed without prejudice on March 17, 2021. The second lawsuit, captioned Brash v. Change Healthcare Inc., et al., was filed in the United States District Court for the Southern District of New York on March 18, 2021, and amended on

March 23, 2021. The third lawsuit, a putative class action captioned Bushansky v. Change Healthcare Inc., et al., was filed in the United States District Court for the Northern District of California on March 19, 2021. The fourth lawsuit, captioned Wilhelm v. Change Healthcare Inc., et al., was filed in the United States District Court for the District of Delaware on March 23, 2021. The fifth lawsuit, captioned Schwartz v. Change Healthcare Inc., et al., was filed in the United States District Court for the Eastern District of New York on March 23, 2021. The sixth lawsuit, captioned Marin v. Change Healthcare Inc., et al., was filed in the United States District Court for the Eastern District of New York on March 24, 2021. The seventh lawsuit, captioned Raagas v. Change Healthcare Inc., et al., was filed in the United States District Court for the District of Delaware on March 25, 2021. The eighth lawsuit, captioned LR Trust v. Change Healthcare Inc., et al., was filed in the United States District Court for the District of Delaware on April 6, 2021. The ninth lawsuit, captioned Artis v. Change Healthcare Inc., et al., was filed in the United States District Court for the Eastern District of Pennsylvania on April 7, 2021. The operative complaints filed in the pending lawsuits name Change and Change's board of directors as defendants and allege, among other things, that the Proxy Statement is materially incomplete and misleading in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. Change has also received written demands from purported stockholders relating to the Transaction. We refer to the foregoing lawsuits and demands collectively as the "Merger Actions."

Change believes that the Merger Actions are without merit and that supplemental disclosures are not required or necessary under applicable laws. However, in order to minimize the risk that the Merger Actions delay or otherwise adversely affect the Transaction, and to minimize the costs, risks and uncertainties inherent in defending the lawsuits, and without admitting any liability or wrongdoing, Change has decided to supplement the Proxy Statement as described in this Current Report on Form 8-K in order to moot certain claims asserted in the Merger Actions. Change and the other named defendants deny that they have violated any laws or breached any duties to Change's stockholders. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, Change specifically denies all allegations in the Merger Actions that any additional disclosure was or is required to supplement the Proxy Statement under applicable law.

Supplemental Disclosures

The following disclosures should be read in conjunction with the disclosures contained in the Proxy Statement, which should be read in its entirety. To the extent that information set forth herein differs from or updates information contained in the Proxy Statement, the information contained herein supersedes the information contained in the Proxy Statement. All page references are to pages in the Proxy Statement, and any defined terms used but not defined herein shall have the meanings set forth in the Proxy Statement.

The Proxy Statement is hereby amended and supplemented as follows:

1) The following disclosure replaces the first full sentence on page 8. The modified text is underlined below.

In addition, pursuant to the terms of the Merger Agreement, Change's directors and executive officers will be entitled to certain ongoing indemnification, expense advancement and insurance arrangements. In addition, pursuant to the TRA Letter Agreement (as defined below), certain of Change's directors and executive officers will become entitled to early termination payments under the 2017 TRA (as defined below). It is also possible that UnitedHealth Group may seek early terminations of other TRAs (as defined below). Should UnitedHealth Group seek to do this, it is possible that other directors and officers could receive early termination payments under those other TRAs.

2) The following disclosure replaces the last full paragraph on page 40. The modified text is underlined or struck-through (as applicable) below.

Following such discussion, the Board met in executive session, without Change management present. Mr. Lance noted that, during anrecentupdate call he had with Messrs. Wichmann and Rex on or about December 8, 2020, Mr. Wichmann expressed interest in speaking with Mr. de Crescenzo about a potential post-closing employment role for Mr. de Crescenzo at UnitedHealth Group. Mr. Lance reported that he told Mr. Wichmann that UnitedHealth Group should not discuss this topic with Mr. de Crescenzo or other members of Change management until the Board provided its consent for UnitedHealth Group to do so. The Board then discussed the topic and determined that, based on the progress that the parties had made in negotiations on key transaction terms thus far (principally, price and provisions related to transaction certainty), the Board was prepared to provide its consent to UnitedHealth Group to reach out to Mr. de Crescenzo regarding potential post-Closing employment with UnitedHealth Group, provided that the Board would receive regular updates regarding the material terms of any such proposed arrangements with Mr. de Crescenzo or other members of Change's senior management team. It was further determined that Mr. Lance would convey this approval to Mr. Wichmann at their next regularly-scheduled call, on December 18, 2020, so long as no negative developments on the progress of the transaction occurred before such meeting.

3) The following disclosure replaces the first full sentence on page 41. The modified text is underlined or struck-through (as applicable) below.

During the weeks of December 14 and December 21, representatives of Simpson Thacher and Sullivan & Cromwell continued to negotiate and exchange drafts of the Merger Agreement, including provisions relating to (i) the termination fee payable by Change to UnitedHealth Group under certain circumstances, (ii) the pre-Closing restrictions on Change's operation of its business, (iii) the treatment of Change employee equity awards in the Merger and (iv) the proposed treatment, in connection with the consummation of the Merger, of certain tax receivable agreements between Change and/orits subsidiaries, on the one hand, and certain investment funds affiliated with Blackstone (such funds, the "TRA Letter Agreement Parties")current or former stockholders of Change, on the other hand (such tax receivable agreements, which are filed as Exhibits 10.2 through 10.7 to Change's Form 10-Kfor the fiscal year ended March 31, 2020,the "ApplicableTRAs"). In particular, UnitedHealth Group sought to negotiate the treatment of certain investment funds affiliated with Blackstone (such funds, the "TRA Letter Agreement Parties") under the TRAs to which the TRA Letter Agreement Parties are parties (such TRAs, which are filed as Exhibits 10.3, 10.4 and 10.5 to Change's Annual Report on Form 10-Kfor the fiscal year ended March 31, 2020, the "Applicable TRAs"). Each TRA provides Change (or its subsidiary) with the option to terminate such TRA prior to its normal expiration date upon a "Change of Control" (as defined therein), and the proposed acquisition of Change by UnitedHealth Group will constitute a Change of Control under each TRA. In order to terminate a given TRA prior to its normal expiration date, Change (or its subsidiary) must make a termination payment to the counterparties thereunder. Each TRA contains a formula for computing the size of the termination payment. The formula terms require Change (or its subsidiary) to make certain determinations and assumptions (e.g., determinations about the value of certain of the Change party's tax assets and assumptions regarding the Change party's taxable income) and apply the appropriate discount rate for the termination payment. UnitedHealth Group requested that the TRA Letter Agreement Parties agree on the method of calculating the termination payments under the Applicable TRAs concurrently with the execution of the Merger Agreement. The purpose of doing so was to provide UnitedHealth Group with greater certainty as to the termination payments that would be owed should UnitedHealth Group choose to terminate the Applicable TRAs in connection with the Closing.

4) The following disclosure replaces the first full paragraph on page 57. The modified text is underlined or struck-through (as applicable) below.

The following table sets forth a summary of the Projections and certain historical financial information for comparison purposes. Dollar totals are in millions and fiscal years end on March 31. The Projections reflected Change's acquisition, on May 1, 2020, of 100% of the ownership interest in eRx Network Holdings, Inc. (as disclosed in Change's Current Report on Form 8-Kfiled on May 4, 2020) and Change's acquisition, on June 1, 2020, of 100% of the ownership interest in each of PDX, Inc., National Healthcare Information Network, Inc. and Freedom Data Systems, Inc. (as disclosed in Change's Current Report on Form 8-Kfiled on June 1, 2020), each as further described in Note 4 to Change's Quarterly Report for the period ended December 31, 2020 filed on February 4, 2021.The Projections for fiscal years 2021 through 2023 with respect to "Solutions Revenue", "Adjusted EBITDA" and "Unlevered Free Cash Flow" (the "LRP Projections") were prepared by management as part of the Board-approved LRP, independent of Change's evaluation of the proposed transaction with UnitedHealth Group. The Projections for fiscal years 2024 through 2030 with respect to "Solutions Revenue", "Adjusted EBITDA" and "Unlevered Free Cash Flow" are not part of the LRP but were prepared by management and approved by the Board as extrapolations of the LRP Projections for purposes of the valuation analyses conducted by Goldman Sachs. The Tax AttributeProjections (as defined in Note 4 below)with respect to "Net Impact to Cash Flows from Tax Attributes"were prepared by management in the ordinary course, independent of Change's evaluation of the proposed transaction with UnitedHealth Group. Change provided a portion of the LRP Projections (but not any of the other Projections) to UnitedHealth Group in connection with UnitedHealth Group's evaluation of the proposed transaction.

1. Each reference to "Net Impact to Cash Flows from Tax Attributes" included in the Proxy Statement (including in the table on page 57) is replaced with a reference to "Tax Attribute Projections", as these two terms are synonymous.
2. The following disclosure replaces Note 4 on page 58. The modified text is underlined or struck-through (as applicable) below.

"Net Impact to Cash Flows from Tax Attributes" means the aggregate net cash flow impact of tax attributes of Change, and is comprised of net operating losses, which have been incurred or are expected to be on November 30 in respect of the then-currentfiscal year (e.g., incurred on November 30, 2020 in respect of the fiscal year ending March 31, 2021), and payments under the tax receivable agreements filed as Exhibits 10.2 through 10.7 to Change's Form 10-Kfor the fiscal year ended March 31, 2020TRAs, which payments are made on July 15 in respect of the most recently completed fiscal year (e.g., payments made on July 15, 2021 in respect of the fiscal year ending March 31, 2021).Change has historically generated tax losses from its operations (i.e., net operating losses), which can be carried forward and utilized against future taxable income to lower Change's tax payments in future years. In general, until the TRAs expire, 85% of the future tax savings from a portion of these net operating losses, as well as other tax attributes, such as amortization on certain intangibles, must be paid to current or previous stockholders of Change under the TRAs (as defined below). The "Tax Attribute Projections" reflect the expected reduction in taxes owed by Change generated by these existing, as well as future projected, net operating losses and other tax attributes, net of expected payments under the TRAs with respect thereto. As a hypothetical example, if Change had net operating losses that were expected to save Change $100 in future taxes, but Change owed $85 in future TRA payments on account of such losses, then the "Tax Attribute Projections" from such net operating losses would be $15.

1. The following disclosure replaces the first paragraph under the section entitled "Interests of Change's Executive Officers and Directors in the Merger" on page 58. The modified text is underlined below.