Item 1.01
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Entry into a Material Definitive Agreement.
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Explanatory Note
As previously announced, on
March 1, 2017, McKesson Corporation (McKesson) and Change Healthcare Inc. (formerly HCIT Holdings, Inc.), a Delaware corporation (the Company), completed certain transactions whereby the majority of McKessons
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, McKesson
issued a press release announcing the commencement of its exchange offer (the Exchange Offer) related to the separation of McKessons 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 McKesson, and the Company (the Merger). As previously announced, in connection with the consummation of the Joint Venture Transactions, the
Company, SpinCo and McKesson 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 the Company, with the Company 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, McKesson 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 SpinCos common stock, par value $0.001 per share (the SpinCo Common Stock). SpinCo will hold all of McKessons 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 McKesson are exchanged, or if the Exchange Offer is consummated but not all of the shares of SpinCo Common
Stock owned by McKesson are exchanged, the remaining shares of SpinCo Common Stock owned by McKesson 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 the Company, 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 the Company, 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, McKesson, SpinCo, the Company, 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, McKesson will transfer to SpinCo all of its direct or indirect interest in Change Healthcare. In addition, McKesson 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, McKesson 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. McKesson, in its sole discretion, will determine the terms of the Exchange Offer, including the number of shares of SpinCos Common Stock that will be offered for each share of
McKesson Common Stock.
The Separation Agreement also sets forth other agreements between McKesson, SpinCo and the Company related to the transactions,
including provisions concerning the termination and settlement of intercompany accounts and financial instruments and the resignation of McKesson personnel from SpinCo prior to the Distribution. The Separation Agreement also sets forth agreements
that govern certain aspects of the relationship between McKesson and the Company after the Distribution, including provisions with respect to litigation, access to information, confidentiality and dispute resolution.