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Acquisitions and Assets Held for Sale | 9 Months Ended
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Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
Acquisitions and Assets Held for Sale | Acquisitions and Assets Held for Sale Oak Street Health Acquisition On May 2, 2023 (the “Oak Street Health Acquisition Date”), the Company acquired 100% of the outstanding shares and voting interest of Oak Street Health for cash (“Oak Street Health Acquisition”). Under the terms of the merger agreement, Oak Street Health stockholders received $39.00 per share in cash. 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 8 ‘‘Borrowings’’ and cash on hand. Oak Street Health is a leading multi-payor, senior focused value-based primary care company. Oak Street Health is included 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. The fair value of the consideration transferred on the date of acquisition consisted of the following:
In millions |
Cash | $ | 9,579 |
Fair value of replacement equity awards for pre-combination services (3.9 million shares) (1) | 118 |
Effective settlement of pre-existing relationship (2) | (29) |
Total consideration transferred | $ | 9,668 |
_____________________________________________ (1)The fair value of the replacement equity awards issued by the Company was determined as of the Oak Street Health Acquisition Date. The fair value of the awards attributed to pre-combination services of $118 million is included in the consideration transferred and the fair value of the awards attributed to post-combination services of $165 million has been, or will be, included in the Company’s post-combination financial statements as compensation costs. (2)The purchase price included $29 million of effectively settled liabilities the Company owed to Oak Street 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 | $ | 201 |
Investments | 168 |
Accounts receivable | 1,143 |
Other current assets | 46 |
Property and equipment | 180 |
Operating lease right-of-use assets | 316 |
Goodwill | 7,189 |
Intangible assets | 4,233 |
Other long-term assets | 7 |
Total assets acquired | 13,483 |
Health care costs payable | 1,098 |
Other current liabilities | 443 |
Operating lease liabilities (current and long-term) | 378 |
Debt (current and long-term) | 1,028 |
Deferred income taxes | 773 |
Other long-term liabilities | 29 |
Total liabilities assumed | 3,749 |
Noncontrolling interests | 66 |
Total consideration transferred | $ | 9,668 |
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 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 | $ | 6,912 |
Pharmacy & Consumer Wellness | 156 |
Health Care Benefits | 121 |
Total goodwill | $ | 7,189 |
The amount of goodwill deductible for income tax purposes was not material. Intangible Assets The following table summarizes the fair values and weighted average useful lives for intangible assets acquired in the Oak Street Health Acquisition:
In millions, except weighted average useful life | Gross Fair Value |  | Weighted Average Useful Life (years)
Customer relationships (1) | $ | 3,620 |  |  | 19.9
Technology | 143 |  |  | 3.0
Trademark (definite-lived) | 470 |  |  | 8.0
Total intangible assets | $ | 4,233 |  |  | 18.0
_____________________________________________ (1) The substantial majority of the customer relationships intangible asset relates to relationships with health plan payers. Deferred Income Taxes The purchase price allocation includes net deferred tax liabilities of $773 million, primarily related to deferred tax liabilities established on the identifiable acquired intangible assets. Consolidated Results of Operations During the period from the Oak Street Health Acquisition Date through September 30, 2023, the Company’s consolidated results of operations included $1.3 billion of revenues and $304 million of operating losses, including $121 million of intangible asset amortization and $51 million of stock-based compensation, associated with the results of operations of Oak Street Health. During the nine months ended September 30, 2023, the Company incurred transaction costs of $77 million associated with the Oak Street Health Acquisition, which were recorded in operating expenses. 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. Signify Health is included 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) | 147 |
Property and equipment | 25 |
Goodwill | 5,922 |
Intangible assets | 1,920 |
Other long-term assets | 23 |
Total assets acquired | 8,603 |
Other current liabilities | 606 |
Debt (current and long-term) | 346 |
Deferred income taxes | 272 |
Other long-term liabilities | 26 |
Total liabilities assumed | 1,250 |
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 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 | $ | 3,419 |
Health Care Benefits | 2,473 |
Pharmacy & Consumer Wellness | 30 |
Total goodwill | $ | 5,922 |
Approximately $1.7 billion of goodwill is deductible for income tax purposes. Intangible Assets The following table summarizes the fair values and weighted average useful lives for intangible assets acquired in the Signify Health Acquisition:
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 $272 million, primarily related to deferred tax liabilities established on the identifiable acquired intangible assets. Consolidated Results of Operations During the period from the Signify Health Acquisition Date through September 30, 2023, the Company’s consolidated results of operations included $528 million of revenues associated with the results of operations of Signify Health, while its impact on consolidated operating income was not material. During the nine months ended September 30, 2023, the Company incurred transaction costs of $37 million associated with the Signify Health Acquisition, which were recorded in operating expenses. Assets Held For Sale The Company continually evaluates its portfolio for non-strategic assets. During 2022, 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. At that time, the LTC business met the criteria to be classified as held for sale. During 2022, 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. During the first quarter of 2023, a 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. While the Company continues to evaluate strategic alternatives for the LTC business, during the third quarter of 2023, the Company determined it was no longer probable that a sale would be completed in the near term. At that time, the Company concluded that the LTC business no longer met the criteria to be classified as held for sale. Accordingly, the assets and liabilities associated with this business have been reclassified to held and used at their respective fair values on the unaudited condensed consolidated balance sheet as of September 30, 2023.

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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 -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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