Business Acquisitions and Divestitures

6 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Acquisitions

Rx Savings Solutions, LLC

On November 1, 2022, the Company completed its acquisition of Rx Savings Solutions, LLC (“RxSS”), a privately-owned company headquartered in Overland Park, Kansas, to expand on connecting biopharma and payer services to patients. RxSS is a prescription price transparency and benefit insight company that offers affordability and adherence solutions to health plans and employers. The purchase consideration included a payment of approximately $600 million made upon closing and a maximum of $275 million of contingent consideration based on RxSS’ financial performance through calendar year 2025. The financial results of RxSS will be included in the Company’s RxTS segment as of the acquisition date in the third quarter of fiscal 2023. The transaction will be accounted for as a business combination and the analysis to assign fair values to the assets acquired and liabilities assumed is currently underway.

Oncology Research Business

On October 31, 2022, the Company completed a transaction with HCA Healthcare, Inc. (“HCA”) to form an oncology research business, combining McKesson’s U.S. Oncology Research (“USOR”) and HCA’s Sarah Cannon Research Institute (“SCRI”), to advance cancer care and increase access to oncology clinical research. McKesson owns a 51% controlling interest in the combined business, and the financial results will be consolidated by the Company and reported within its U.S. Pharmaceutical segment as of the acquisition date in the third quarter of fiscal 2023. Transaction consideration included the transfer of full ownership interest in USOR to the combined business and $173 million of cash paid to HCA. The transaction will be accounted for as a business combination and the analysis to assign fair values to the assets acquired, liabilities assumed, and noncontrolling interest is currently underway.

Separately, on October 31, 2022, McKesson acquired Genospace, SCRI’s personalized medicine platform. Genospace is a leading innovator in precision medicine and clinical trial matching and will enhance McKesson’s oncology data and analytics capabilities. The acquisition of Genospace will be accounted for as a business combination and its financial results will be included in the U.S. Pharmaceutical segment as of the acquisition date in the third quarter of 2023. The analysis to assign fair values to the assets acquired and liabilities assumed is currently underway.

Divestitures

In July 2021, the Company announced its intention to exit its businesses in Europe resulting in classification of certain assets and liabilities as held for sale. Assets and liabilities of $2.8 billion and $2.0 billion, respectively, at September 30, 2022, and $4.5 billion and $4.7 billion, respectively, at March 31, 2022, met the criteria for classification as held for sale, primarily consisting of disposal groups related to the Company’s European divestiture activities discussed below. The decrease in assets and liabilities held for sale during fiscal 2023 was driven by the divestiture of the Company’s U.K. disposal group in April 2022, as discussed in more detail below.

Assets and liabilities to be disposed of by sale (“disposal groups”) are classified as “held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The classification occurs when the disposal group is available for immediate sale and the sale is probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell, and long-lived assets included within the disposal group are not depreciated or amortized. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was classified as held for sale. The Company determined that the disposal groups classified as held for sale do not meet the criteria for classification as discontinued operations.

European Divestiture Activities

On July 5, 2021, the Company entered into an agreement to sell certain of its businesses in the European Union (“E.U.”) located in France, Italy, Ireland, Portugal, Belgium, and Slovenia, along with its German headquarters and wound-care business, part of a shared services center in Lithuania, and its ownership stake in a joint venture in the Netherlands (“E.U. disposal group”) to the PHOENIX Group for a purchase price of €1.2 billion (or, approximately $1.2 billion) adjusted for certain items, including cash, net debt and working capital adjustments, and reduced by the value of the noncontrolling interest held by minority shareholders of McKesson Europe AG (“McKesson Europe”) at the transaction closing date. The transaction closed on October 31, 2022, and the Company received net cash proceeds of $892 million after the adjustments listed above. As of September 30, 2022 and March 31, 2022, the E.U. disposal group within the Company’s International segment, was classified as “Assets held for sale” and “Liabilities held for sale,” respectively, in the Condensed Consolidated Balance Sheets.

During the three and six months ended September 30, 2022, the Company recorded a gain of $23 million and $35 million, respectively, and during the three and six months ended September 30, 2021, recorded charges totaling $491 million to remeasure the assets and liabilities of the E.U. disposal group to fair value less costs to sell. The fiscal 2022 charges also included impairments of individual assets, such as certain internal-use software that will not be utilized in the future, prior to adjusting the E.U. disposal group as a whole. The remeasurement adjustment in the three and six months ended September 30, 2021 included a $226 million loss related to the accumulated other comprehensive income balances associated with the E.U. disposal group. These amounts were recorded within “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations. The Company’s measurement of the fair value of the E.U. disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy.

The total assets and liabilities of the E.U. disposal group that have met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheets are as follows:


(In millions)	September 30, 2022		March 31, 2022
Assets
Current assets
Receivables, net	$	1,175	$	1,322
Inventories, net	810		809
Prepaid expenses and other	68		72
Property, plant, and equipment, net	278		304
Operating lease right-of-use assets	206		224
Intangible assets, net	236		267
Other non-current assets	297		328
Remeasurement of assets of businesses held for sale to fair value less costs to sell (1)	(245)		(302)
Total assets held for sale	$	2,825	$	3,024

Liabilities
Current liabilities
Drafts and accounts payable	$	1,258	$	1,826
Current portion of long-term debt	4		4
Current portion of operating lease liabilities	28		33
Other accrued liabilities	360		473
Long-term debt	10		11
Long-term deferred tax liabilities	64		55
Long-term operating lease liabilities	153		180
Other non-current liabilities	114		138
Total liabilities held for sale	$	1,991	$	2,720

(1)Excludes charges in fiscal 2022 related to the impairment of individual assets, including a $113 million impairment of internally developed software recorded directly against the gross value of the assets impacted.

On April 6, 2022, the Company completed the previously announced sale of its retail and distribution businesses in the United Kingdom (“U.K. disposal group”) to Aurelius Elephant Limited for a purchase price of £110 million (or, approximately $144 million), including certain adjustments. As part of the transaction, the Company divested net assets of $615 million and released $731 million of accumulated other comprehensive loss, within the International segment, and the buyer assumed and repaid a note payable to the Company of approximately $118 million.

Following the completion of the transaction on April 6, 2022, there were no assets or liabilities of the U.K. disposal group classified as held for sale in the Company’s Condensed Consolidated Balance Sheets. The total assets and liabilities of the U.K. disposal group that met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheet at March 31, 2022 were as follows:


(In millions)	March 31, 2022
Assets
Current assets
Cash and cash equivalents	$	531
Receivables, net	931
Inventories, net	563
Prepaid expenses and other	50
Property, plant, and equipment, net	91
Operating lease right-of-use assets	270
Intangible assets, net	117
Other non-current assets	88
Remeasurement of assets of businesses held for sale to fair value less costs to sell	(1,159)
Total assets held for sale	$	1,482

Liabilities
Current liabilities
Drafts and accounts payable	$	1,593

Current portion of operating lease liabilities	50
Other accrued liabilities	59

Long-term deferred tax liabilities	16
Long-term operating lease liabilities	262
Other non-current liabilities	38
Total liabilities held for sale	$	2,018

Other

For the periods presented, the Company also completed de minimis acquisitions and divestitures within its operating segments. Financial results for the Company’s business acquisitions have been included in its consolidated financial statements as of their respective acquisition dates. Purchase prices for business acquisitions have been allocated based on estimated fair values at the respective acquisition dates.