SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(Amendment No. 9)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
McKESSON CORPORATION
(Name of Subject Company)
McKESSON CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, par value $2.00 per share
(Title of Class of Securities)
581556 10 7
(CUSIP number of Class of Securities)
Ivan D. Meyerson, Esq.
Vice President and General Counsel
McKESSON CORPORATION
McKesson Plaza
One Post Street
San Francisco, California 94104
(415) 983-8300
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With a copy to:
Peter Allan Atkins, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
(212) 735-3000
This Amendment No. 9 amends the
Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") of McKesson Corporation, a
Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission on July 15, 1994,
relating to the tender offer for all outstanding shares
of common stock, par value $2.00 per share, of the
Company (including all associated preferred stock
purchase rights), by ECO Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Eli
Lilly and Company, an Indiana corporation, as follows:
Item 8. Additional Information to be Furnished.
Item 8 is hereby amended by the addition of the
following paragraph at the end of Item 8:
On November 22, 1994 the Company issued the
press release attached hereto as Exhibit 27. The
information set forth in the press release is
incorporated herein by reference.
Item 9. Material to be Filed as Exhibits.
Item 9 is hereby amended by the addition of the
following exhibits thereto:
Exhibit 27 Press Release issued by the Company
dated November 22, 1994
Exhibit 28 Closing Statement dated November 21,
1994 among Eli Lilly and Company, ECO
Acquisition Corporation, McKesson
Corporation, a Delaware corporation,
McKesson Corporation, a Maryland
corporation, Clinical
Pharmaceuticals, Inc., PCS Health
Systems, Inc. and SP Ventures, Inc.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth
in this statement is true, complete and correct.
McKESSON CORPORATION
Dated: November 22, 1994 By:/s/ Nancy A. Miller
Name: Nancy A. Miller
Title: Vice President and
Corporate Secretary
EXHIBIT INDEX
Exhibit No. Description
Exhibit 27 Press Release issued by the Company dated November
22, 1994
Exhibit 28 Closing Statement dated November 21, 1994 among Eli
Lilly and Company, ECO Acquisition Corporation,
McKesson Corporation, a Delaware corporation,
McKesson Corporation, a Maryland corporation,
Clinical Pharmaceuticals, Inc., PCS Health Systems,
Inc. and SP Ventures, Inc.
Exhibit 27
Contact: Charles Pool
(415) 983-9470
McKESSON COMPLETES DISTRIBUTION OF NEW McKESSON STOCK
IN CONNECTION WITH SALE OF PCS BUSINESS TO ELI LILLY
SAN FRANCISCO, Tuesday, November 22, 1994 -- McKesson
Corporation announced the completion yesterday of the formal
distribution of the new McKesson Corporation shares issued in
connection with the sale of McKesson's PCS Health Systems business
to Eli Lilly and Company. The new McKesson Corporation shares were
issued to those holders of old McKesson Corporation shares held of
record as of Saturday, November 19, 1994. Stock certificates for
the new McKesson Corporation shares are expected to be mailed early
next week.
As previously announced, the distribution had been
conditioned, among other things, upon the satisfaction or waiver of
the conditions to the tender offer by Eli Lilly for old McKesson
shares. Yesterday Eli Lilly accepted for payment the shares of old
McKesson stock which had been tendered but not withdrawn as of 5:00
p.m. yesterday (which tendered shares represented approximately
94.9% of the total outstanding old McKesson shares). In connection
with yesterday's transactions, old McKesson also received a capital
contribution from Lilly (which amount was transferred to new
McKesson) of approximately $639 million (representing a total
transaction value for the PCS Health Systems business of $4
billion).
Under the terms of Lilly's tender offer, Lilly will pay
$76 per share for the old McKesson shares tendered. It is expected
that a merger of old McKesson with a subsidiary of Lilly will be
consummated early next week, pursuant to which the remaining old
McKesson stockholders would receive $76 per share in the merger.
Exhibit 28
CLOSING STATEMENT
Reference is hereby made to (a) the Agreement and
Plan of Merger, dated as of July 10, 1994 (as amended, the
"Merger Agreement"), with McKesson Corporation, a Delaware
corporation ("McKesson Delaware"), Eli Lilly and Company, an
Indiana corporation ("Parent"), and ECO Acquisition
Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent (the "Purchaser") and (b) the
Reorganization and Distribution Agreement, dated as of July
10, 1994 (as amended, the "Distribution Agreement"), with
McKesson Delaware, McKesson Corporation, a Maryland
corporation and a wholly-owned subsidiary of McKesson
Delaware ("McKesson Maryland"), Clinical Pharmaceuticals,
Inc., a Delaware corporation and a wholly-owned subsidiary
of McKesson Delaware, PCS Health Systems, Inc., a Delaware
corporation and a wholly-owned subsidiary of McKesson
Maryland, and SP Ventures, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Company ("Spinco"). All
capitalized terms used herein but not otherwise defined
herein shall have the respective meanings ascribed to them
in the Merger Agreement.
The parties set forth below agree that:
(a) the Spinco Cash Amount calculations attached
hereto as Exhibit 1 reflect the methodology agreed upon by
the parties in connection with the transactions contemplated
pursuant to the Merger Agreement and the Distribution
Agreement (subject to the "true-up" contemplated pursuant to
the letter dated November 18, 1994 from Jon W. d'Alessio to
Arnold C. Hanish);
(b) McKesson Delaware may issue on Monday,
November 21, 1994 commercial paper indebtedness of McKesson
Delaware (not to exceed $125,000,000); provided that such
indebtedness (i) shall be repaid by Spinco on Tuesday,
November 22, 1994 and (ii) shall be included within the
Company Liabilities (as defined in the Distribution
Agreement) and subject to the indemnification provisions
related thereto;
(c) the value of the shares of Parent Common Stock
issued pursuant to Sections 2.10(a)(ii) and 2.10(c)(ii) of
the Merger Agreement, as determined pursuant to Section
4.1(g) of the Distribution Agreement, shall be paid by
Spinco to McKesson Delaware on Tuesday, November 22, 1994
pursuant to Section 4.1(g) of the Distribution Agreement and
such amount shall not be included as a receivable of the
Prescription Business in calculating Negative Net Working
Capital (such terms, as defined in the Distribution
Agreement);
(d) Spinco represents and warrants that all
actions contemplated pursuant to the Merger Agreement, the
Distribution Agreement and Exhibit 1 hereto (including the
notes thereto) in respect of restricted Shares and stock
options are permitted by the instruments governing such
securities and that all such actions have been duly
authorized on behalf of McKesson Delaware;
(e) all cash and cash equivalents held or
previously held by Pharmaceutical Card System Canada, Inc.,
a corporation organized under the laws of Canada, shall be
deemed to be a Company Asset (as defined in the Distribution
Agreement);
(f) McKesson Delaware shall be permitted to pay to
Retained Employees on the date hereof pro-rated bonuses (for
the period covering the first 8 months of McKesson
Delaware's current fiscal year), either pursuant to the
McKesson Corporation Management Incentive Plan ("MIP") (such
bonuses, the "MIP Bonuses") or under other compensation
arrangements of McKesson Delaware (the "Non-MIP Bonuses");
the parties further agree that Spinco shall (i) reimburse
McKesson Delaware on November 22, 1994 in full for the
amount of all Non-MIP Bonuses paid on this date to Retained
Employees (i.e., $439,235), (ii) reimburse McKesson Delaware
(promptly upon receipt by Spinco of written notice from
McKesson Delaware of the calculated amounts set forth below)
for any excess amounts paid with respect to the MIP Bonuses
in the event that, following the end of McKesson Delaware's
current fiscal year, it is determined that, based on the
financial performance of the Retained Business, the amount
of the MIP Bonuses paid to Retained Employees on the date
hereof exceeded the amounts otherwise payable on a pro-rata
basis over such 8-month period to such Retained Employees
under the MIP and (iii) pay to McKesson Delaware, at the end
of McKesson Delaware's current fiscal year, an amount equal
to $64,346 (it being understood that such amount is being
paid in lieu of the time value of the MIP Bonuses during the
four-month period up to the end of McKesson Delaware's
current fiscal year);
IN WITNESS WHEREOF, each of the parties set forth
below has caused this Closing Statement to be executed on
its behalf by a duly authorized officer as of the date first
set forth above.
Dated as of November 21, 1994
ELI LILLY AND COMPANY
(an Indiana corporation)
By:_____________________
Name:
Title:
ECO ACQUISITION CORPORATION
(a Delaware corporation)
By:_____________________
Name:
Title:
McKESSON CORPORATION
(a Delaware corporation)
By:_____________________
Name:
Title:
McKESSON CORPORATION
(a Maryland corporation)
By:_____________________
Name:
Title:
CLINICAL PHARMACEUTICALS, INC.
(a Delaware corporation)
By:_____________________
Name:
Title:
PCS HEALTH SYSTEMS, INC.
(a Delaware corporation)
By:_____________________
Name:
Title:
SP VENTURES, INC.
(a Delaware corporation)
By:_____________________
Name:
Title:
Exhibit 1
SPINCO CASH AMOUNT
Set forth below is a summary of the calculation of
the Spinco Cash Amount:
Additions
Aggregate Consideration . . . . . $4,000,000,000.00
Exercise of Options . . . . . . . 0.00(1)
Spinco Cash Payment . . . . . . . + 0.00(2)
Subtotal . . . . . $4,000,000,000.00
Subtractions
Amt. Payable in Offer and Merger. $3,326,887,156.00(3)
Cash-out of Exercisable Options . 33,911,349.00(4)
Series A Preferred Redemption . . - 0.00(5)
Subtotal . . . . . $3,360,798,505.00
Total . . . . . $ 639,201,495.00
_____________________
1Pursuant to Section 2.13 of the Merger Agreement, the
aggregate exercise price received by McKesson Delaware
from any exercisable options prior to the Effective Time
shall be calculated immediately prior to the Effective
Time.
2McKesson Delaware did not enter into a Preferred Stock
Purchase Agreement pursuant to Section 2.5 of the
Distribution Agreement; accordingly, no amounts were paid
to McKesson Delaware pursuant thereto.
3See Schedule A for a calculation of the amounts payable
pursuant to the Offer and the Merger.
4See Schedule B for a calculation of the amount paid or
payable by McKesson Delaware (pursuant to Section
2.10(a)(i) of the Merger Agreement) with respect to the
cash-out of exercisable options.
5The Series A Convertible Preferred Stock was redeemed on
August 29, 1994, prior to the Offer Purchase Date.
Schedule A
Amount Payable Pursuant
to the Offer and the Merger
Calculation of Number of Shares
Subject to the Offer and the Merger
Total issued and outstanding Shares . . . . . . . . . .
44,920,159(6)
Outstanding Shares held by McKesson Maryland . . . . . . 1,000,000
1988 Plan restricted Shares - McK employees . . . . . . 56,800*
1988 Plan restricted Shares - PCS employees . . . . . .
53,600(7)
1973 Stock Purchase Plan Shares - McK and PCS empl.. .
15,940(8)
Miscellaneous restricted Shares - McK empl. . . . . . . - 18,988*
Total . . . . . . . . . . . 43,774,831
Calculation of Cash Amount Payable
43,774,831 Shares x $76.00 = $3,326,887,156.00
* The parties agree that (a) all restricted Shares of McKesson Delaware shall
be cancelled by McKesson Delaware after the expiration of the Offer but prior
to the Effective Time, (b) cash otherwise payable in respect of such
restricted Shares is included in the Spinco Cash Amount and shall be retained
and paid out by Spinco pursuant to Section 2.10(c)(i) of the Merger Agreement
and (c) following the payment of the Spinco Cash Amount contemplated hereby,
neither Parent, the Purchaser nor McKesson Delaware shall have any liability
with respect to such restricted Shares.
____________________
6Includes 2,720,457 Shares issued upon the conversion of
the Series B ESOP Preferred Stock.
7The parties agree that (a) such restricted Shares of
McKesson Delaware shall be cancelled by McKesson Delaware
on Tuesday, November 22, 1994 and shares of Parent Common
Stock shall be issued in lieu thereof (as well as in lieu
of the cancellation of the shares of Spinco common stock)
in accordance with Section 2.10(c)(ii) of the Merger
Agreement and (b) following the cancellation of such
restricted Shares, Spinco shall not have any liability
with respect to such restricted Shares.
8The 1973 Stock Purchase Plan Shares will be acquired by
Parent pursuant to the Merger; however, the calculation
of the Spinco Cash Amount was done assuming that these
Shares would be redeemed. As a result, the Spinco Cash
Amount was overstated by $1,211,440, which will be
reimbursed by Spinco on November 22, 1994.
Schedule B
Amounts Payable With Respect to
the Cash-out of Exercisable Options
Calculation of Adjustment to PCS Exercisable Options
Pursuant to Section 8.2(c)(iii) of the Distribution Agreement,
exercisable options held by PCS employees will be equitably adjusted
as of the closing date. In accordance with such equitable adjustment,
(a) the number of Shares covered by such options will be increased by
multiplying such amount by the Company Conversion Factor (as referred
to below and more completely defined in the Distribution Agreement),
and (b) the exercise price of such options will be decreased by
dividing such amount by the Company Conversion Factor. Pursuant to
Section 8.2(c)(i) of the Distribution Agreement, the term "Company
Conversion Factor" shall mean an amount equal to the quotient obtained
by dividing (1) the sum of (A) the merger consideration, plus (B) the
fair market value of the Spinco common stock, by (2) the merger
consideration. Accordingly, based on a merger price of $76.00 per
share and a Spinco share value of $32.375 (based on "when-issued"
trading values) (resulting in an assumed total transaction value of
$108.375), the Company Conversion Factor would be approximately 1.43.
Therefore, the number of shares subject to PCS exercisable options,
namely 83,107, would be adjusted to 118,843 (83,107 x 1.426 =
118,509).
Calculation of Total Exercisable Options
Exercisable options - McKesson employees . . . . . . 989,770
Exercisable options - PCS employees (as adjusted). . 118,509
Total . . . . . . . . 1,108,279
Calculation of Total Option Spread
1,108,279 shares x $76.00 tender price . . . . . . . $84,229,204
1,108,279 shares x $24.86 aver. adj. exer. price . . - 27,551,816
Net option spread . . . . . . . 56,677,388
Amount of spread deferred by Spinco employees. . . . - 22,766,039(9)
Amount to be paid in cash-out of options . . . . . . $33,911,349
_______________________
9 This amount (a) excludes amounts deferred by PCS
employees and (b) is the Deferred Option Amount for which
Spinco is solely liable (following its receipt of the
Spinco Cash Amount) pursuant to Section 2.10(a)(i) of the
Merger Agreement.
