Business Context and Reporting Period
On February 6, 2014, McKesson Corporation completed the acquisition of a majority stake in Celesio AG, a leading international wholesale and retail company operating in 14 countries. The transaction was executed by McKesson's wholly-owned subsidiary, Dragonfly GmbH & Co. KGaA. Following the acquisition, McKesson's ownership of Celesio exceeded 75% on a fully diluted basis. Celesio's operations will be integrated into McKesson's Distribution Solutions segment.
Key Financial Metrics
- Total Transaction Value: Approximately €3.7 billion (approximately $5.0 billion based on a $1.35/€1 exchange rate).
- Acquisition Consideration: €23.50 per share for approximately 70.9% of Celesio's undiluted share capital.
- Debt Financing: McKesson utilized $4.957 billion from a $5.5 billion 364-day unsecured Senior Bridge Term Loan, with the balance funded by cash on hand.
- Target Revenue (Celesio): Approximately €22.3 billion ($28.5 billion) for the twelve months ended December 31, 2012, and €16.0 billion ($21.1 billion) for the nine months ended September 30, 2013.
- Convertible Bonds Acquired: 4,840 of the 2014 Bonds and 2,180 of the 2018 Bonds from the Elliott Group.
Material Changes
The primary material change is the expansion of McKesson's European footprint through the acquisition of Celesio. The company has significantly increased its leverage by drawing down $4.957 billion under a new bridge loan facility to fund the transaction. No pro forma financial information or specific financial statements for the acquired business were included in this filing; they are scheduled to be filed within 71 days.
Outlook, Risks, and Management Commentary
- Future Actions: McKesson AcquiCo intends to launch a voluntary public tender offer for the remaining outstanding shares of Celesio and shares issued upon further bond conversions.
- Operational Strategy: McKesson and Celesio expect to maintain their own brands and continue supporting customers through existing channels.
- Financing Terms: The bridge loan is a 364-day unsecured facility intended to pay acquisition consideration, fund additional share/bond acquisitions, and cover transaction costs.
- Risks/Contingencies: The filing notes that the descriptions of the Share Purchase Agreement, Bond Purchase Agreement, and Business Combination Agreement are qualified by reference to the full text of those documents.
Investor Verification Checklist
- Verify the final exchange rate used for the $5.0 billion valuation versus the actual closing rate.
- Monitor the upcoming filing (within 71 days) for Celesio's audited financial statements and pro forma financial information.
- Track the progress and terms of the voluntary public tender offer for remaining Celesio shares.
- Review the terms of the $5.5 billion bridge loan, specifically interest rates and repayment conditions, in the referenced January 29, 2014 Form 8-K.
- Confirm the integration timeline for Celesio into the Distribution Solutions segment.