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Acquisition and Assets Held for Sale | 3 Months Ended
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Mar. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
Acquisition and Assets Held for Sale | Acquisitions and Assets Held for Sale Signify Health Acquisition On March 29, 2023 (the “Signify Health Acquisition Date”), the Company acquired 100% of the outstanding shares and voting interest of Signify Health for cash (“Signify Health Acquisition”). Under the terms of the merger agreement, Signify Health stockholders received $30.50 per share in cash. The Company financed the transaction with cash on hand, which included approximately $6 billion of proceeds from the issuance of senior unsecured notes in February 2023. Signify Health is a leader in health risk assessments, value-based care and provider enablement services. The Company will include Signify Health within the Health Services segment. The Company acquired Signify Health to advance its health care services strategy, growth in value-based care and new product offerings for other payers. The fair value of the consideration transferred on the date of acquisition consisted of the following:
In millions |
Cash | $ | 7,450 |
Fair value of replacement equity awards for pre-combination services (3.2 million shares) (1) | 14 |
Effective settlement of pre-existing relationship (2) | (111) |
Total consideration transferred | $ | 7,353 |
_____________________________________________ (1)The fair value of the replacement equity awards issued by the Company was determined as of the Signify Health Acquisition Date. The fair value of the awards attributed to pre-combination services of $14 million is included in the consideration transferred and the fair value of the awards attributed to post-combination services of $167 million has been, or will be, included in the Company’s post-combination financial statements as compensation costs. (2)The purchase price included $111 million of effectively settled liabilities the Company owed to Signify Health from their pre-existing relationship. The transaction has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values at the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
In millions |
Cash and cash equivalents | $ | 376 |
Accounts receivable | 190 |
Other current assets (including restricted cash of $28) | 149 |
Property and equipment | 25 |
Goodwill | 5,907 |
Intangible assets | 1,920 |
Other long-term assets | 23 |
Total assets acquired | 8,590 |
Other current liabilities | 609 |
Debt (current and long-term) | 346 |
Deferred income taxes | 256 |
Other long-term liabilities | 26 |
Total liabilities assumed | 1,237 |
Total consideration transferred | $ | 7,353 |
The assessment of fair value is preliminary and is based on information that was available to management at the time the unaudited condensed consolidated financial statements were prepared. The most significant open items included the valuation of certain intangible assets, the estimation of certain contract assets and contract liabilities, the accounting for income taxes and the accounting for contingencies as management is awaiting additional information to complete its assessment of these matters. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. The finalization of the Company’s purchase accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed, which could be material. Goodwill Goodwill represents future economic benefits expected to arise from the Company’s expanded presence in the health services industry, the assembled workforce acquired, expected revenue and medical cost synergies, as well as operating efficiencies and cost savings. The preliminary valuation of goodwill was allocated to the Company’s business segments as follows:
In millions |
Health Services | $ | 3,404 |
Health Care Benefits | 2,473 |
Pharmacy & Consumer Wellness | 30 |
Total goodwill | $ | 5,907 |
Approximately $1.7 billion of goodwill is deductible for income tax purposes. Intangible Assets The following table summarizes the preliminary fair values and weighted average useful lives for intangible assets acquired in the Signify Health Acquisition, each of which is subject to change as the Company finalizes its purchase accounting:
In millions, except weighted average useful life | Gross Fair Value |  | Weighted Average Useful Life (years)
Customer relationships | $ | 1,810 |  |  | 16.7
Technology | 50 |  |  | 3.0
Trademark (definite-lived) | 60 |  |  | 5.0
Total intangible assets | $ | 1,920 |  |  | 16.0
Deferred Income Taxes The purchase price allocation includes net deferred tax liabilities of $256 million, primarily related to deferred tax liabilities established on the identifiable acquired intangible assets. Consolidated Results of Operations The results of operations for Signify Health from the Signify Health Acquisition Date to March 31, 2023 were immaterial to the Company’s consolidated results of operations for the three months ended March 31, 2023. During the three months ended March 31, 2023, the Company incurred transaction costs of $37 million associated with the Signify Health Acquisition that were recorded within operating expenses. Oak Street Health Acquisition On May 2, 2023, the Company acquired 100% of the outstanding shares and voting interest of Oak Street Health, Inc. (“Oak Street Health”) for cash. Under the terms of the merger agreement, Oak Street Health stockholders received $39.00 per share in cash. The total value of the transaction was approximately $10.6 billion. The Company financed the transaction with borrowings of $5.0 billion from a term loan agreement entered into on May 1, 2023 as described in Note 7 ‘‘Borrowings’’ and cash on hand. Oak Street Health is a leading multi-payor, senior focused value-based primary care company. The Company will include Oak Street Health within the Health Services segment. The Company acquired Oak Street Health to advance its value-based care strategy and broaden its platform into primary care. Assets Held For Sale The Company continually evaluates its portfolio for non-strategic assets. The Company determined that its Omnicare® long-term care business (“LTC business”), which is included within the Pharmacy & Consumer Wellness segment, was no longer a strategic asset and during the third quarter of 2022 committed to a plan to sell the LTC business. During 2022, the LTC business met the criteria to be classified as held for sale and the carrying value of the LTC business was determined to be greater than its estimated fair value less costs to sell. Accordingly, the Company recorded total losses on assets held for sale of $2.5 billion during the year ended December 31, 2022. As of March 31, 2023, the net assets of the LTC business continued to meet the criteria for held-for-sale accounting. During the three months ended March 31, 2023, an incremental loss on assets held for sale of $349 million was recorded to write-down the carrying value of the LTC business to the Company’s best estimate of the ultimate selling price which reflects its estimated fair value less costs to sell. The loss on assets held for sale represents the write-down of long-lived assets and was recorded in the Company’s unaudited condensed consolidated statement of operations within the Pharmacy & Consumer Wellness segment. The LTC business operating income was not material for the three months ended March 31, 2023 and 2022. The LTC business met the criteria to be classified as held for sale at both March 31, 2023 and December 31, 2022, but did not meet the criteria to be classified as discontinued operations. As a result, the related assets and liabilities were included in the separate held-for-sale line items of the asset and liability sections of the unaudited condensed consolidated balance sheets. As the assets held for sale are measured at fair value on a nonrecurring basis primarily using unobservable inputs as of the measurement date, they are classified in Level 3 of the fair value hierarchy. The following table summarizes the assets and liabilities held for sale at March 31, 2023 and December 31, 2022:
In millions | March 31, 2023 |  | December 31, 2022
Assets: |  |  |
Accounts receivable, net | $ | 211 |  |  | $ | 227 |
Inventories | 183 |  |  | 188 |
Property and equipment, net | — |  |  | 244 |
Deferred income taxes | 214 |  |  | 131 |
Other | 17 |  |  | 118 |
Total assets held for sale | $ | 625 |  |  | $ | 908 |
Liabilities: |  |  |
Accounts payable | $ | 84 |  |  | $ | 86 |
Accrued expenses | 58 |  |  | 71 |
Other | 71 |  |  | 71 |
Total liabilities held for sale | $ | 213 |  |  | $ | 228 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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