McKesson Health Solutions and Change Healthcare Holdings have completed their previously announced agreement to create a new healthcare IT company, Change Healthcare. It combines all of Change Healthcare Holdings' business and the majority of McKesson Technology Solutions (MTS).
McKesson owns approximately 70% of Change Healthcare, with the remaining equity ownership held by Change Healthcare Holdings stockholders, including Blackstone and Hellman & Friedman. The new company is jointly governed by McKesson and Change Healthcare Holdings stockholders.
In other McKesson news, in its fourth quarter results, the firm anticipates recording a pretax gain of approximately $2.9 billion to $3.5 billion. Also, results will exclude generally accepted accounting principles (GAAP) and adjusted operating income from MTS' contributed businesses for the month of March, which is estimated to be $48 million to $61 million, driven by the closing date of the transaction.
During the month of March 2017, McKesson's consolidated income statement will contain neither the earnings of the MTS contributed businesses due to the timing of the close, nor any equity earnings from the new company owing to a one-month lag.
Based on the recently completed debt financing, McKesson's 70% share of Change Healthcare's initial annual interest expense run rate is expected to be approximately $200 million, equivalent to an average interest rate of approximately 4.7%, the firm added. McKesson will also record its share of a one-time, noncash reduction to the carrying value of its deferred revenue balance, reducing reported earnings in fiscal 2018 by approximately $140 million to $170 million.
McKesson will continue to report its operations in two segments, McKesson Distribution Solutions (MDS) and MTS. McKesson's equity ownership of Change Healthcare will be reflected in the MTS segment, the vendor said.
