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SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 19, 1998
Date of Report
(October 17, 1998)
(Date of earliest event reported)
HBO & COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-9900 37-0986839
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(Commission File Number) (Employer Identification No.)
301 Perimeter Center North
Atlanta, GA 30346
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(Address of principal executive offices) (Zip Code)
(770) 393-6000
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Registrant's telephone number, including area code
Exhibit Index on page 2 of 8
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1
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Item 5: Other Events
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On October 18, 1998, McKesson Corporation and HBO & Company (HBOC)
announced that the two companies have signed a definitive agreement for
McKesson to acquire HBOC. Terms of the merger call for each HBOC shareholder
to receive .37 shares of McKesson common stock for each share of HBOC stock
in a tax-free exchange. The merger, which is subject to regulatory approval,
McKesson and HBOC shareholder approval and other customary conditions, will
be accounted for as a pooling of interests and is anticipated to close in the
first quarter of 1999. Further information regarding the proposed merger is
set forth in the press release attached hereto as Exhibit 99, which is hereby
incorporated by reference herein.
Item 7: Financial Statements and Exhibits
(c) Exhibits
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Exhibit No. Description Page
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99 HBO & Company News Release dated October 18, 1998 4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HBO & COMPANY
(Registrant)
Date: October 19, 1998
/s/ Jay P. Gilbertson
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Jay P. Gilbertson
President, Co-Chief Operating Officer,
Chief Financial Officer, Treasurer,
Principal Accounting Officer,
and Secretary
3
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Exhibit 99
News Release
McKESSON AND HBOC TO MERGE CREATING McKESSON HBOC,
THE WORLD LEADER IN HEALTHCARE SERVICES
-- Merger Combines the #1 Healthcare Supply Management and the
#1 Healthcare Information Companies To Give
Unparalleled Offering Across Full Continuum of Care --
-- Uniting Information and Supply Management Leaders Will
Improve Productivity and Clinical Outcomes for Healthcare Delivery --
SAN FRANCISCO and ATLANTA, October 18, 1998 - McKesson Corporation (NYSE:
MCK) and HBO & Company (NASDAQ: HBOC) today announced that the two companies
have signed a definitive merger agreement for McKesson to acquire HBOC. This
merger will create the world's first comprehensive healthcare supply
management and information solutions company, uniting the top-performing,
rapidly growing leaders in their respective industries: McKesson, the #1
healthcare supply management company, and HBOC, the #1 healthcare information
company.
Terms of the merger call for each HBOC shareholder to receive 0.37
shares of McKesson common stock for each share of HBOC stock in a tax-free
exchange. The merger, which is subject to regulatory approval, McKesson and
HBOC shareholder approval and other customary conditions, will be accounted
for as a pooling of interests and is anticipated to close in the first
quarter of 1999.
Following the merger, the company will be named McKesson HBOC. McKesson
HBOC will be the world's leading healthcare services company, with the
greatest breadth of product offerings and deepest reach in both the
healthcare supply and healthcare information sectors. The two companies have
a combined customer base of approximately 5,000 hospitals, 25,000 retail
pharmacies, 35,000 physician practices, 10,000 extended care sites, 600
payors, 450 pharmaceutical manufacturers and 2,000 medical-surgical
manufacturers. McKesson HBOC will serve the full continuum of healthcare in
the United States and have operations in 10 countries abroad.
"The fragmentation of healthcare information and therapeutic product
supply among the many sites and organizations involved in healthcare delivery
is a major impediment to improving clinical outcomes and achieving
productivity gains," Charles W. McCall, chairman, president and chief
executive officer of HBOC, and Mark A. Pulido, president and chief executive
officer of McKesson, said jointly, "Our vision for McKesson HBOC is a
comprehensive offering to improve productivity and clinical outcomes for the
U.S. healthcare system. The complementary capabilities of McKesson and HBOC
span the entire information and supply cost structure across the full
continuum of healthcare, enabling McKesson HBOC to uniquely offer the
most-comprehensive array of products and technology.
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We will provide the tools and technologies to enable healthcare providers to
increase their efficiency, reducing their costs of doing business, while at
the same time improving the quality of care for patients."
"Both companies are number one in their segments, and are currently
experiencing strong sales and earnings momentum," McCall and Pulido
continued. "We both have long used information technology as a primary tool
to meet the needs of our customers. Our mutual focus on information, data,
logistics and automation avoids risks often associated with healthcare
services such as capital intensity, labor and reimbursement. And both
companies have outstanding records of consistently exceeding expectations and
building shareholder value."
"Customers, manufacturers, employees and shareholders of both companies
will benefit from the expanded product and service offerings, broader reach
and integration of information systems and supply management from McKesson
HBOC. Our capacity to integrate and analyze useful information gathered from
manufacturers to patients across the full continuum of care has major
benefits for drug research, clinical development, product utilization,
patient care and the overall productivity of the healthcare system."
"The merger is expected to be accretive in the first year to both
companies' earnings per share after synergies," McCall and Pulido added.
"We've identified first full year pre-tax synergies in excess of $75 million
from a combination of cost savings and easy-to-achieve cross-selling
initiatives. In addition, synergies in excess of $150 million can be expected
to be achieved by the end of year three. The combined company reaches every
site in the continuum of care with very little overlap, and thus will be able
to quickly exploit opportunities to cross-sell each other's products. HBOC's
350-person hospital sales force significantly augments McKesson's 50-person
hospital automation sales force. McKesson has 550 professionals calling on
physicians, which will substantially broaden the penetration for HBOC's
physician information products currently being sold by 50 people."
"According to the report of the U.S. Senate Labor and Human Resources
Committee, of the $1 trillion U.S. Health Committee Care expenditures in
1996, $180 billion was spent on administrative costs and $330 billion on
avoidable or inappropriate care. McKesson HBOC with its encompassing
healthcare products and information flow will use its combined resources,
technologies and customer knowledge to develop new offerings to address this
opportunity. There is also a substantial opportunity for business from large
pharmaceutical companies and HMOs as they seek to outsource greater
components of their operations while using data as a tool to preserve market
share and product margins. Capitalizing on these opportunities, McKesson
HBOC's earnings per share growth rates should be greater than 35%, delivering
enhanced value to shareholders of both companies," McCall and Pulido
concluded.
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Based on published reports and Wall Street estimates for McKesson and
HBOC for the twelve months ended September 30, 1998, McKesson HBOC had
revenues of approximately $21.2 billion, earnings before interest and taxes
of $886 million (before synergies) and a net debt-to-capital ratio of
approximately 24%. McKesson HBOC's strong cash flow will enable it to
continue an aggressive acquisition program to capitalize on additional supply
management and technology opportunities.
On October 16, 1998, the two companies had a combined equity market
capitalization of almost $23 billion. Since January 1, 1996, HBOC and
McKesson have ranked among the leading companies in total shareholder return.
McCall will become chairman of McKesson HBOC. Pulido will become
president and chief executive officer of the new company. The McKesson HBOC
Board of Directors will have 10 members, five from the current board of
McKesson and five from the current board of HBOC. An Operating Committee will
be established, consisting of McCall, Pulido and:
- - Albert J. Bergonzi, group president, HCIS,
- - Jay P. Gilbertson, group president, HCIS,
- - John H. Hammergren, group president, Health Systems,
- - Richard H. Hawkins, vice president, chief financial officer,
- - David L. Mahoney, group president, Pharmaceutical Services and
International,
and
- - Mark T. Majeske, group president, Customer Operations.
The two companies will retain the employee base that has played a key
role in their growth and the creation of shareholder value. The combined
company will have significant executive management and employee ownership.
The corporate headquarters of the combined company will be in San
Francisco. Atlanta will be headquarters for the healthcare information
business. The combined company will have approximately 20,300 employees
across the United States, Canada and Europe, approximately 2,500 of whom are
located in San Francisco or Atlanta.
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Profile of the combined company
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McKesson HBOC
HBOC McKesson Pro Forma
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Financials
($MM) (a)
Twelve months ended
September 30, 1998
Revenues (b) 1,460 19,700 21,160
EBIT 454 432 961(c)
Net income to common shares 284 207 538(c)
Diluted shares(MM) 439.4 104.0 266.6
Earnings per share $.65 $1.99 $2.02(c)
September 30, 1998
Total Assets 1,535 7,000 8,535
Cash and equivalents 556 130 686
Debt 1 1,625 1,626
Stockholders' Equity 1,185 1,800 2,985
Employees 6,500 14,000 20,500
Total Salesforce 480 1,450 1,930
- - Hospital Automation
and Information 350 50 400
- - Hospital Pharma -- 200 200
and Med-Surg
- - Payor 60 -- 60
- - Physicians 50 550 600
- - Extended Care 20 150(d) 170
- - Retail -- 500 500
Countries 9 3 11
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(a) From continuing operations before special charges and merger expenses
(McKesson data based on consensus First Call estimate of $.50 earnings
per share and company quarter estimates for balance sheet items for
9/30/98)
(b) Revenues exclude McKesson sales to customers' warehouses
(c) Includes $75 million in first full-year pre-tax synergies
(d) Includes Red Line, which McKesson has agreed to acquire.
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HBOC delivers enterprise-wide patient care, clinical, financial and
strategic management software solutions as well as networking technologies,
electronic commerce, outsourcing and other services to healthcare
organizations throughout the world. More information about HBOC can be
obtained on the World Wide Web at http://www.hboc.com.
McKesson Corporation, a Fortune 100 company, is the leading healthcare
supply management company in North America through its U.S. Healthcare
businesses; its Canadian subsidiary, Medis Health and Pharmaceutical
Services; and its interest in Mexico's Nadro. The company also owns McKesson
Water Products, one of the nation's largest providers of bottled drinking
water. More information about McKesson can be obtained on the World Wide Web
at: Error! Bookmark not defined.
Except for the historical information contained herein, the matters
discussed in this press release may constitute forward-looking statements
that involve risks and uncertainties that could cause actual results to
differ materially from those projected. These statements may be identified by
their use of forward-looking terminology such as "believes," "expects,"
"may," "should," "intends," "plans," "estimates," "anticipates" and similar
words. Risks and uncertainties include the speed of integration of HBOC and
McKesson as well as acquired businesses, impact of continued competitive
pressures, success of strategic initiatives, implementation of new
technologies, continued industry consolidation, changes in customer mix,
changes in pharmaceutical manufacturers' pricing and distribution policy, the
changing U.S. healthcare environment, regulatory changes affecting capital
procurement policies and other factors discussed from time to time in reports
filed by HBOC and McKesson with the Securities and Exchange Commission. The
two companies assume no obligation to update information contained in this
press release.
Note to Editors: See attached McKesson and HBOC Overviews for further
information about the two companies.
# # #
Contacts: McKesson HBOC
Media Monika Brown
Larry Kurtz (770) 668-5926
(415) 983-8418 Beth Dalton
Kim Sankaran (770) 393-6587
(415) 983-8416
Investor Relations
Janet Bley
(415) 983-9357
