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Business Combinations | 9 Months Ended
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Dec. 31, 2016
Business Combinations [Abstract] |
Business Combinations | Business Combinations During the first nine months of 2017, we completed our acquisitions of Rexall Health, Vantage Oncology Holdings LLC (“Vantage”), Biologics, Inc. (“Biologics”), UDG Healthcare Plc (“UDG”) and J Sainsbury Plc (“Sainsbury”), as further discussed below. In the first quarter of 2017, we adopted the amended accounting guidance for an acquirer’s accounting for measurement period adjustments. Accordingly, as required, we now recognize all measurement period adjustments in the reporting period in which the adjustments are determined. Rexall Health On December 28, 2016, we completed our acquisition of Rexall Health of the Katz Group Canada, Inc. for cash purchase consideration of $2.9 billion Canadian dollars (or, approximately $2.1 billion U.S. dollars), which was funded from cash on hand. Rexall Health operates approximately 470 retail pharmacies in Canada, particularly in Ontario and Western Canada. As part of the transaction, McKesson agreed to divest stores in 26 local markets that the Competition Bureau of Canada (the “Bureau”) identified during its review of the transaction. We do not anticipate any store closures as a result of these divestitures. The acquisition of Rexall Health will enhance our capability to continue to deliver a broad range of pharmaceutical care and choice to Canadian consumers. Commencing in the fourth quarter of 2017, financial results for Rexall will be included in our North America pharmaceutical distribution and services business within our Distribution Solutions segment. Total assets acquired and liabilities assumed, excluding goodwill and intangibles, were $687 million and $199 million. Approximately $1.1 billion of the preliminary purchase price allocation has been assigned to goodwill, net of goodwill classified as held for sale, which primarily represents intangible assets that do not qualify as separate recognition. The amount of goodwill expected to be deductible for tax purposes is approximately $860 million. Included in the preliminary purchase price allocation are acquired identifiable intangibles of $656 million, net of intangibles classified as held for sale, primarily representing trade names and customer relationships. We are currently evaluating the expected lives of the identifiable intangibles. Additionally, we classified those stores that we agreed to divest under the agreement reached with the Bureau as held for sale as of the acquisition date. As a result, approximately $110 million of assets and $1 million of liabilities are included in “Current assets held for sale” and “Current liabilities held for sale” in the accompanying condensed consolidated balance sheet as of December 31, 2016. The following table summarizes the preliminary recording of the fair values of the assets acquired and liabilities assumed for the acquisition as of the acquisition date. Due to the recent timing and complexity of the acquisition, these amounts are provisional and subject to change as our fair value assessments are finalized.
(In millions) | Amounts Recognized as of Acquisition Date (Provisional)
Receivables | $ | 114 |
Inventory | 271 |
Other current assets, net of cash and cash equivalents acquired | 141 |
Goodwill | 1,142 |
Intangible assets | 656 |
Other long-term assets | 161 |
Current liabilities | (154 | )
Other long-term liabilities | (45 | )
Fair value of net assets, less cash and cash equivalents | 2,286 |
Less: Settlement of pre-existing payables | 165 |
Purchase consideration paid in cash, net of cash acquired | $ | 2,121 |
Vantage & Biologics On April 1, 2016, we acquired Vantage, which is headquartered in Manhattan Beach, California. Vantage provides comprehensive oncology management services, including radiation oncology, medical oncology, and other integrated cancer care services, through over 51 cancer treatment facilities in 13 states. The net purchase consideration of $515 million was funded from cash on hand. On April 1, 2016, we also acquired Biologics for net purchase consideration of $692 million, which was funded from cash on hand. Biologics is one of the largest independent oncology-focused specialty pharmacy in the U.S., and is headquartered in Cary, North Carolina. Financial results for these acquisitions since the acquisition date are included in our results of operations within our North America pharmaceutical distribution and services business, which is part of our Distribution Solutions segment. These acquisitions collectively enhance our specialty pharmaceutical distribution scale and oncology-focused pharmacy offerings, provide solutions for manufacturers and payers, and expand the scope of our community-based oncology and practice management services. The following table summarizes the preliminary recording of the fair values of the assets acquired and liabilities assumed for these two acquisitions as of the acquisition date:
(In millions) | Amounts Previously Recognized as of Acquisition Date (Provisional) (1) |  | Measurement Period Adjustments |  | Amounts Recognized as of Acquisition Date (Provisional as Adjusted)
Receivables | $ | 106 |  |  | $ | (7 | ) |  | $ | 99 |
Other current assets, net of cash and cash equivalents acquired | 19 |  |  | — |  |  | 19 |
Goodwill | 1,219 |  |  | (131 | ) |  | 1,088 |
Intangible assets | 136 |  |  | 72 |  |  | 208 |
Other long-term assets | 76 |  |  | 37 |  |  | 113 |
Current liabilities | (117 | ) |  | (2 | ) |  | (119 | )
Other long-term liabilities | (80 | ) |  | (28 | ) |  | (108 | )
Fair value of net assets, less cash and cash equivalents | 1,359 |  |  | (59 | ) |  | 1,300 |
Less: Noncontrolling Interests | (152 | ) |  | 59 |  |  | (93 | )
Fair value of net assets acquired, net of cash and cash equivalents | $ | 1,207 |  |  | $ | — |  |  | $ | 1,207 |
(1) | As reported on Form 10-Q for the quarter ended June 30, 2016.
During the first nine months of 2017, we recorded certain measurement period adjustments to the provisional fair value of assets acquired and liabilities assumed as of the acquisition date. The amounts as of the acquisition date are provisional and subject to change within the measurement period as our fair value assessments are finalized. At December 31, 2016, approximately $516 million and $572 million of the adjusted preliminary purchase price allocations for Vantage and Biologics have been assigned to goodwill, which primarily reflects the expected future benefits of synergies upon integrating the businesses. Goodwill represents the excess of the purchase price and the fair value of noncontrolling interests over the fair value of the acquired net assets. Most of the goodwill is not expected to be deductible for tax purposes. Included in the adjusted preliminary purchase price allocation are acquired identifiable intangibles of $15 million and $193 million for Vantage and Biologics. Acquired intangibles for Vantage primarily consist of $7 million of non-competition agreements with a weighted average life of 4 years, and for Biologics primarily consist of $170 million of trade names with a weighted average life of 9 years. The adjusted preliminary fair value of Vantage’s noncontrolling interests as of the acquisition date was approximately $93 million, which represents the portion of net assets of Vantage’s consolidated entities that is not allocable to McKesson. UDG On April 1, 2016, we completed our acquisition of the pharmaceutical distribution businesses of UDG based in Ireland and the United Kingdom (“U.K.”) with a net purchase consideration of €380 million (or, approximately $431 million), which was funded with cash on hand. The acquired UDG businesses primarily provide pharmaceutical and other healthcare products to retail and hospital pharmacies. The acquisition of UDG expands our offerings and strengthens our market position in Ireland and the U.K. Financial results for UDG since the acquisition date are included in our results of operations within our International pharmaceutical distribution and services business, which is part of our Distribution Solutions segment. During the first nine months of 2017, we recorded certain measurement period adjustments to the provisional fair value of assets acquired and liabilities assumed as of the acquisition date. The net effect of the cumulative period adjustments was an increase in goodwill of approximately $16 million from the provisional amounts as previously reported at June 30, 2016. Goodwill reflects the expected future benefits of synergies upon integrating the businesses. Most of the goodwill is not expected to be deductible for tax purposes. At December 31, 2016, the adjusted preliminary fair values of assets acquired and liabilities assumed as of the acquisition date, excluding goodwill and intangibles, were $467 million and $332 million. Included in the adjusted preliminary purchase price allocation are acquired identifiable intangibles of $115 million primarily comprised of customer relationships with a weighted average life of 10 years. The amounts as of the acquisition date are provisional and subject to change within the measurement period as our fair value assessments are finalized. Sainsbury On August 31, 2016, we completed our acquisition of the pharmacy business of Sainsbury based in the U.K. with a net purchase consideration of £128 million (or, approximately $168 million). This acquisition further enhances our retail pharmacy service capabilities in the U.K. Financial results for Sainsbury since the acquisition date are included in our results of operations within our International pharmaceutical distribution and services business, which is part of our Distribution Solutions segment. Under the terms of the agreement, on February 29, 2016, we made an advance cash payment of £125 million (or, approximately $174 million) representing the full purchase consideration, subject to net working capital adjustment, which was included in “Other Noncurrent Assets” within our condensed consolidated balance sheet as of March 31, 2016. The advance payment bore interest at an annual rate of 3.3%, compounded daily, from February 29, 2016 until the acquisition date. Upon the completion of the acquisition, we received an interest payment. Total provisional fair value of assets acquired and liabilities assumed, excluding goodwill and intangibles, was $29 million and $18 million as of the acquisition date. Approximately $92 million of the adjusted preliminary purchase price allocations has been assigned to goodwill, which primarily reflects the expected future benefits of synergies upon integrating the businesses. Included in the preliminary purchase price allocation are acquired identifiable intangibles of $65 million primarily representing restrictive pharmacy licenses with a weighted average life of 15 years. The amounts as of the acquisition date are provisional and subject to change within the measurement period as our fair value assessments are finalized. The fair value of acquired intangibles was primarily determined by applying the income approach, using several significant unobservable inputs for projected cash flows and a discount rate. These inputs are considered Level 3 inputs under the fair value measurements and disclosure guidance. Other Acquisitions During the last two years, we also completed a number of other acquisitions within both of our operating segments. Financial results for our business acquisitions have been included in our condensed consolidated financial statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated based on estimated fair values at the date of acquisition. Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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