McKesson Sets Plans For Venture -- WSJ
29 June 2016 - 5:04PM
Dow Jones News
By Tess Stynes
Health-care giant McKesson Corp. on Tuesday said it plans to
form a health-care information-technology joint venture that it
expects to take public later in an initial public offering.
The planned company will combine most of McKesson's technology
segment with the bulk of Change Healthcare Holdings Inc., which is
majority owned by Blackstone Group LP.
McKesson would own 70% of the new company, with the rest owned
by Change Healthcare's shareholders, including Blackstone and
Hellman & Friedman LLC.
The new company has received commitments for $6.1 billion of
debt, with proceeds targeted to repay $2.7 billion of Change
Healthcare's debt, as well as make payments of $1.25 billion to
McKesson and $1.75 billion to Change Healthcare's holders.
The deal excludes McKesson's RelayHealth Pharmacy business and
its enterprise-information segment. McKesson separately said it
plans to explore strategic options for the EIS unit.
The divestiture will dismantle what has been a high-margin
business for McKesson, but one overshadowed by the company's
growing pharmaceutical distribution business. McKesson has made
acquisitions recently to expand its European drug distribution
business and U.S. oncology services. McKesson's planned takeover of
retail pharmacy Rexall Health for $2.2 billion would broaden its
reach in Canada.
Meanwhile, McKesson saw few opportunities for information
technology deals at the right price, John Hammergren, McKesson's
president and CEO, said in an interview. The announced joint
venture will benefit from greater scale, he said.
Earlier this month The Wall Street Journal reported that
McKesson was considering a separation of its information-technology
unit as the company grapples with pricing pressure in its core
drug-distribution business.
McKesson said the businesses in the new venture generated
combined revenue of $3.4 billion for the year ended March 31. The
venture aims to generate more than $150 million in annual cost
savings by the second year after closing, which is expected in the
first half of next year.
McKesson CEO Hammergren will be chairman of the venture, while
Change Healthcare CEO Neil de Crescenzo will lead the new firm. Mr.
Hammergren said the venture will unite complementary capabilities
from both companies to help customers address complex financial and
clinical challenges.
--Melanie Evans contributed to this article.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
June 29, 2016 02:49 ET (06:49 GMT)
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