What is the significance of the Tax Matters Agreement?

The Tax Matters Agreement is a critical document that outlines the rights, responsibilities, and obligations of McKesson, SpinCo, and Change Healthcare concerning tax liabilities, benefits, attributes, and contests after the separation. It is designed to ensure the separation qualifies as a tax-free transaction for shareholders and includes provisions to protect McKesson in case Change Healthcare's actions jeopardize this status.

When will McKesson discuss the financial impact of the SpinCo separation?

McKesson announced a conference call scheduled for Tuesday, March 17, 2020, at 4:30 PM Eastern Time. During this call, the Chief Financial Officer will discuss the anticipated impact of the transactions on the company's Fiscal Year 2020 adjusted earnings per diluted share.

What were the outcomes of the Exchange Offer?

The 8-K filing confirms the consummation of the Exchange Offer related to the separation of SpinCo. Press releases announced on March 10, 2020, and March 12, 2020, detailed the preliminary and final results of this offer, indicating the successful completion of a key step in the separation process.

Are there any potential financial implications for McKesson if the separation is not tax-free?

Yes, if the consummation of the Exchange Offer does not qualify as a tax-free transaction due to Change Healthcare's non-compliance with the Tax Matters Agreement, Change Healthcare will be required to indemnify McKesson. In certain circumstances, Change Healthcare may also need to enter into a new tax receivable agreement to pay McKesson 85% of certain cash tax savings arising from the utilization of specific tax basis increases.

MCK 8-K: Material Agreements & Regulation FD

Summary

McKesson Corporation (MCK) filed an 8-K on March 13, 2020, detailing significant events related to the separation of its former Information Technology business (now Change Healthcare). The filing primarily concerns the execution of a Tax Matters Agreement, crucial for defining tax responsibilities between McKesson, SpinCo, and Change Healthcare post-transaction. This agreement is vital for maintaining the tax-free status of the separation for shareholders and includes provisions for indemnification and potential tax receivable agreements if tax-free status is jeopardized by Change Healthcare's actions. Additionally, the 8-K announces McKesson's plan to host an investor conference call on March 17, 2020, to discuss the completion of the split-off of SpinCo. The CFO is expected to provide insights into the anticipated impact of these transactions on Fiscal Year 2020 adjusted earnings per diluted share. The filing also confirms the consummation and preliminary/final results of the Exchange Offer related to the separation.

Key Highlights

1Execution of a Tax Matters Agreement on March 9, 2020, governing tax responsibilities between McKesson, SpinCo, and Change Healthcare post-separation.
2The Tax Matters Agreement is critical for ensuring the separation is tax-free for shareholders and includes provisions for Change Healthcare to indemnify McKesson if tax-free status is compromised.
3McKesson announced a conference call for March 17, 2020, to discuss the completion of the split-off of its former IT business (SpinCo).
4The CFO will discuss the anticipated impact of the separation transactions on McKesson's Fiscal Year 2020 adjusted earnings per diluted share during the conference call.
5Confirmation of the consummation and preliminary results of the Exchange Offer related to the separation of SpinCo.
6Announcement of the final results of the Exchange Offer on March 12, 2020.
7The filing incorporates key press releases and the Tax Matters Agreement as exhibits.

MCKESSON CORP 8-K Report, Material Agreement (Mar 13, 2020)

Summary

Key Highlights

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