<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-26103
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 9, 1997)
2,791,738 Shares
McKesson Corporation
COMMON STOCK
----------------
This Prospectus Supplement and the accompanying Prospectus relate to
2,791,738 shares (the "Shares") of common stock, par value $0.01 per share
(the "Common Stock"), of McKesson Corporation, a Delaware corporation
("McKesson" or the "Company"), offered hereby (the "Offering") by the selling
stockholders named herein (the "Selling Stockholders"), and sold by the
Underwriter named below. See "Selling Stockholders" and "The Underwriter"
herein. The Company will not receive any proceeds from the sale of the Shares
offered hereby. The Common Stock is listed on the New York Stock Exchange (the
"NYSE") and the Pacific Exchange under the symbol "MCK." On June 10, 1997, the
reported last sales price of the Common Stock on the NYSE was $77 1/4 per
share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REP-
RESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares will be purchased from the Selling Stockholders by Morgan Stanley
& Co. Incorporated (the "Underwriter") at a price of $74.73 per share
(resulting in $208,626,580.74 aggregate net proceeds (before expenses) to the
Selling Stockholders). The Company will pay certain expenses of the Offering
estimated at $135,000.
The Shares may be offered by the Underwriter from time to time in one or
more transactions (which may involve block transactions) on the NYSE, or on
other national securities exchanges on which the Common Stock is traded, in
the over-the-counter market, through negotiated transactions or otherwise at
market prices prevailing at the time of the sale or at prices otherwise
negotiated, subject to prior sale, when, as and if delivered to and accepted
by the Underwriter. See "The Underwriter."
The Company and the Selling Stockholders have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act").
----------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriter named herein and subject to approval of certain legal matters
by Brown & Wood LLP, counsel for the Underwriter. It is expected that delivery
of the Shares will be made on or about June 16, 1997 at the office of Morgan
Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
----------------
MORGAN STANLEY DEAN WITTER
June 11, 1997
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Use of Proceeds......................... S-3
Common Stock Price Ranges and Dividends. S-3
Selling Stockholders.................... S-4
The Underwriter......................... S-4
Legal Matters........................... S-6
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........... 2
Incorporation of Certain
Documents by Reference......... 2
Special Note Regarding Forward-
Looking Statements............. 3
Risk Factors.................... 3
The Company..................... 4
Use of Proceeds................. 7
Selling Stockholders............ 7
Description of Capital Stock.... 8
Plan of Distribution............ 11
Experts......................... 12
Legal Matters................... 12
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITER.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN
THE SHARES OFFERED HEREBY, NOR DO THEY CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SHARES OFFERED HEREBY BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
In connection with this Offering, the Underwriter may effect transactions
which stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriter may overallot in connection with the Offering,
and may bid for, and purchase, the Shares in the open market. For a
description of these activities, see "The Underwriter."
S-2
<PAGE>
USE OF PROCEEDS
McKesson will not receive any of the proceeds from the sale of the Shares by
the Selling Stockholders.
COMMON STOCK PRICE RANGES AND DIVIDENDS
The McKesson Common Stock sale prices (as quoted on the NYSE Composite Tape)
and per share dividend data for each full quarter during fiscal years ended
March 31, 1995, 1996 and 1997, and the first quarter of fiscal 1998 through
June 10, 1997, respectively, are set forth below. The payment of future
dividends on the Common Stock and the amounts thereof will depend on business
conditions, earnings and financial requirements of the Company and other
relevant factors.
<TABLE>
<CAPTION>
COMMON STOCK
PRICE DIVIDENDS DECLARED
--------------- PER SHARE OF
FISCAL YEAR HIGH LOW COMMON STOCK
- ----------- ------ ------ ------------------
<S> <C> <C> <C>
1995
First Quarter....................... $ 87 $ 58 1/2 $.42
Second Quarter...................... 103 5/8 70 3/4 .42
Third Quarter....................... 109 1/4 30 1/8(1) .25
Fourth Quarter...................... 40 3/4 31 7/8 .25
1996
First Quarter....................... 47 3/8 37 1/4 .25
Second Quarter...................... 46 5/8 42 5/8 .25
Third Quarter....................... 53 1/4 44 7/8 .25
Fourth Quarter...................... 55 5/8 46 1/2 .25
1997
First Quarter....................... 51 3/8 44 .25
Second Quarter...................... 48 3/8 39 .25
Third Quarter....................... 57 45 3/8 .25
Fourth Quarter...................... 69 5/8 51 3/4 .25
1998
First Quarter (through June 10,
1997).............................. 78 5/8 63 .25
</TABLE>
- --------
(1) Reflects a $76 per share cash distribution resulting from the sale of
McKesson's wholly-owned subsidiary PCS Health Systems, Inc. to Eli Lilly
and Company.
On June 10, 1997, the last sales price reported for the Common Stock on the
NYSE was $77 1/4 per share. Prospective purchasers of Shares are urged to
obtain current quotations for the market price of the Common Stock.
S-3
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of the date of this
Prospectus Supplement with respect to shares of Common Stock owned by the
Selling Stockholders which are covered by this Prospectus Supplement.
<TABLE>
<CAPTION>
COMMON STOCK OWNERSHIP
PRIOR TO THE OFFERING SHARES
-------------------------SHARES-BEING OWNED AFTER
NAME OF SELLING STOCKHOLDER NUMBER PERCENTAGE OFFERED OFFERING
--------------------------- ------------ ------------------------ -----------
<S> <C> <C> <C> <C>
Kelso Investment Associates
IV, L.P. ................... 1,774,034 3.87% 1,774,034 0
Kelso Equity Partners II,
L.P. ....................... 39,910 .09% 39,910 0
Chase Equity Associates,
L.P. ....................... 294,557 .64% 294,557 0
John Rutledge Partners,
L.P. ....................... 251,930 .55% 251,930 0
Princes Gate Investors,
L.P. ....................... 174,404 .38% 174,404 0
Acorn Partnership I, L.P. ... 20,748 .05% 20,748 0
PGI Investments Limited...... 20,541 .04% 20,541 0
PGI Sweden AB................ 20,541 .04% 20,541 0
Gregor Von Opel.............. 10,272 .02% 10,272 0
The Louis and Patricia Kelso
Trust....................... 3,612 .01% 3,612 0
William A. Marquard.......... 2,890 .006% 2,890 0
The Frank T. Nickell IRA..... 14,450 .03% 14,450 0
David M. Roderick............ 4,335 .01% 4,335 0
George L. Shinn.............. 1,445 .003% 1,445 0
Steven B. Nielsen(1)......... 60,885 .13% 60,885 0
F. DeWight Titus(1).......... 85,293 .19% 85,293 0
Donald B. Garber(1).......... 11,891 .03% 11,891 0
</TABLE>
- --------
(1) Excludes (i) 6000 shares of restricted Common Stock held by Steven B.
Nielsen subject to possible forfeiture under McKesson's 1994 Stock Option
and Restricted Stock Plan (the "1994 Plan") and (ii) options to acquire
shares of Common Stock under the 1994 Plan held by Steven B. Nielsen, F.
DeWight Titus and Donald B. Garber.
The Chase Manhattan Bank, N.A., an affiliate of Chase Equity Associates,
L.P., serves as trustee for the McKesson Corporation Profit-Sharing Investment
Plan (the "PSIP"). As of June 2, 1997, 10,126,057 shares of Common Stock were
held in the PSIP.
Mr. Nielsen has been Chairman of the Board and Chief Executive Officer of
General Medical Inc. ("General Medical") since its formation in May 1994 and
of GM Holdings, Inc., a Delaware corporation ("Holdings") and a wholly owned
subsidiary of General Medical and of McKesson General Medical Corp. (formerly
known as General Medical Corporation), a Virginia corporation ("MGMC") and a
wholly owned subsidiary of Holdings since September 1993. He also served as
President of MGMC from December 1988 to April 1997. In addition, Mr. Nielsen
has been a Vice President of the Company since March 26, 1997. Mr. Titus has
been Vice Chairman and a director of General Medical, Holdings and MGMC since
October 1994 and has also served as Executive Vice President since February
1996. Mr. Garber has been Senior Vice President and Chief Financial Officer of
General Medical since its formation in May 1994 and of Holdings and MGMC since
August 1989.
THE UNDERWRITER
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), Morgan Stanley
& Co. Incorporated (the "Underwriter") has agreed to purchase, and each of the
Selling Stockholders has agreed to sell to the Underwriter, the Shares.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Shares is subject to the approval of
certain legal matters by its counsel and to certain other conditions. The
Underwriter is obligated to take and pay for all the Shares if any are taken.
S-4
<PAGE>
The Company has agreed that, without the prior written consent of the
Underwriter, it will not, during the period ending 30 days after the date
hereof, and each Selling Stockholder has agreed that, without the prior
written consent of the Underwriter, it will not, during the period ending 90
days after the date hereof: (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are now owned by such Selling
Stockholder or are hereafter acquired prior to or in connection with the
Offering) or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities,
in cash or otherwise. The foregoing sentence shall not apply to (a) the Shares
to be sold hereunder, (b) the shares of Common Stock of the Company held by a
Selling Stockholder which are transferred or sold to an affiliate of such
Selling Stockholder so long as such affiliate agrees to be bound by the
provisions of this paragraph, (c) the issuance by the Company of shares of
Common Stock upon conversion of the 5% Trust Convertible Preferred Securities
(the "Preferred Securities") and the related 5% Convertible Junior
Subordinated Debentures due 2027 or any filings with the Commission or resales
or transfers of securities in connection with the offering of the Preferred
Securities or (d) the issuance by the Company of shares of Common stock or
options to purchase Common Stock pursuant to employee benefit plans
incorporated by reference herein. In addition, each Selling Stockholder,
agrees that, without the prior written consent of the Underwriter, it will
not, during the period ending 90 days after the date hereof, make any demand
for, or exercise any right with respect to, the registration of any shares of
Common Stock or any security convertible into or exercisable or exchangeable
for Common Stock.
It is expected that all or a substantial portion of the Shares may be sold
by the Underwriter to purchasers in one or more transactions (which may
involve block transactions) on the NYSE or on other national securities
exchanges on which the Common Stock is traded or otherwise. The distribution
of the Shares may also be effected from time to time in special offerings,
exchange distributions and/or secondary distributions pursuant to and in
accordance with the rules of the NYSE or such other exchanges, in the over-
the-counter market, in negotiated transactions through the writing of options
on the Shares (whether such options are listed on an options exchange or
otherwise), or in a combination of such methods at prevailing market prices or
at negotiated prices. The Underwriter may effect such transactions by selling
Shares to or through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from the Underwriter and/or the
purchasers of such Shares for whom they may act as agents or to whom they may
sell as principal.
In order to facilitate the Offering of the Shares, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Shares. Specifically, the Underwriter may overallot in connection with
the offering, creating a short position in the Shares for its own account. In
addition, to cover overallotments or to stabilize the price of the Shares, the
Underwriter may bid for, and purchase, shares of Common Stock in the open
market. Finally, the Underwriter may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the Shares in the offering, if the
Underwriter repurchases previously distributed Shares in transactions to cover
short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Shares above
independent market levels. The Underwriter is not required to engage in these
activities and may end any of these activities at any time.
In connection with the sale of the Shares, the Underwriter will receive
compensation in the form of commissions or discounts and may receive
compensation from purchasers of the Shares for whom they may act as agent or
to whom they may sell as principal in the form of commissions or discounts, in
each case in amounts which will not exceed those customary in the types of
transactions involved. The Underwriter and dealers that participate in the
distribution of the Shares may be deemed to be underwriters, and any discounts
received by them from the Selling Stockholders and any compensation received
by them on resale of the Shares by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
S-5
<PAGE>
Except with respect to the United States, no action has been taken by the
Company or the Underwriter that would permit a public offering of the Shares
in any country or jurisdiction where action for that purpose is required.
Accordingly, the Shares may not be offered, sold or delivered, directly or
indirectly, and neither this document nor any offering circular, prospectus,
form of application, advertisement or other offering material may be
distributed or published in any other such country or jurisdiction except
under circumstances that will result in compliance with any applicable laws
and regulations.
Purchasers of the Shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the public offering price.
The Company and each of the Selling Stockholders have agreed to indemnify
the Underwriter against certain liabilities, including liabilities under the
Securities Act, or contribute to payments which the Underwriter may be
required to make in respect thereof.
LEGAL MATTERS
Certain legal matters in connection with the offering to which this
Prospectus Supplement and the accompanying Prospectus relate will be passed
upon for the Company by Ivan D. Meyerson, Vice President and General Counsel
of McKesson, and by Skadden, Arps, Slate, Meagher & Flom LLP. Certain legal
matters will be passed upon for the Underwriter by Brown & Wood LLP. Mr.
Meyerson owns shares of, and holds options to purchase, in the aggregate, less
than 1% of McKesson's Common Stock.
S-6
<PAGE>
PROSPECTUS
2,791,738 SHARES
MCKESSON CORPORATION
COMMON STOCK
----------------
This Prospectus relates to 2,791,738 shares (the "Shares") of common stock,
par value $0.01 per share (the "Common Stock"), of McKesson Corporation, a
Delaware corporation ("McKesson" or the "Company"), which may be offered by
the selling stockholders named herein (the "Selling Stockholders") from time
to time. The Company will receive no part of the proceeds from sales of the
Shares offered hereby.
The Common Stock is listed on the New York Stock Exchange (the "NYSE") and
the Pacific Exchange (the "PE") under the trading symbol "MCK." On June 6,
1997, the closing price of the Common Stock on the NYSE was $77 3/8 per
share.
The Shares will be sold either directly by the Selling Stockholders or
through underwriters, brokers, dealers, or agents. At the time any particular
offer of Shares is made, if and to the extent required, the specific number of
Shares offered, the offering price, and the other terms of the offering,
including the names of any underwriters, brokers, dealers or agents involved
in the offering and the compensation, if any, of such underwriters, brokers,
dealers or agents, will be set forth in a supplement to this Prospectus (a
"Prospectus Supplement"). Any statement contained in this Prospectus will be
deemed to be modified or superseded by any inconsistent statement contained in
any Prospectus Supplement delivered herewith.
Unless this Prospectus is accompanied by a Prospectus Supplement stating
otherwise, offers and sales may be made pursuant to this Prospectus only in
ordinary broker's transactions made on the NYSE or PE in transactions
involving ordinary and customary brokerage commissions.
The Company will pay certain expenses in connection with offers and sales of
the Shares pursuant to this Prospectus.
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE SHARES.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is June 9, 1997.
<PAGE>
AVAILABLE INFORMATION
This Prospectus constitutes part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Shares. This Prospectus omits certain of
the information contained in the Registration Statement, and reference hereby
is made to the Registration Statement and to the exhibits thereto for further
information with respect to the Company and the Common Stock offered hereby.
Any statements contained herein concerning the provisions of any document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and, in each instance, reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement
herein is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the Commission's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549, or at
the public reference facilities of the regional offices in Chicago and New
York. The addresses of these regional offices are as follows: 500 West Madison
Street, Suite 1400, Chicago, Illinois 66061, and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material also can be obtained
by mail from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by
the rules and regulations of the Commission. Reports, proxy statements and
other information concerning the Company may also be inspected at the offices
of the New York Stock Exchange, Inc. at 20 Broad Street, New York, New York
10005 and at the offices of the Pacific Exchange, Inc. at 301 Pine Street, San
Francisco, California 94104 and 233 South Beaudry Avenue, Los Angeles,
California 90012. The Company's Common Stock is listed on both exchanges. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents previously filed or to be filed by the Company with the Commission
pursuant to the Exchange Act:
1. Annual Report on Form 10-K for the fiscal year ended March 31, 1996, as
amended by Amendment No. 1 on Form 10-K/A, filed on February 13, 1997 to
reflect Armor All (as defined herein) and Millbrook (as defined herein) as
discontinued operations.
2. Quarterly Reports on Form 10-Q for the quarters ended (i) June 30, 1996
(as amended by Amendment No. 1 on Form 10-Q/A, filed on February 13, 1997 to
reflect Armor All and Millbrook as discontinued operations; and as further
amended by Amendment No. 2 on Form 10-Q/A, filed on June 6, 1997 to reflect in
the first quarter ended June 30, 1996, the $48.2 million charge to write off
the portion of the purchase price of Automated Healthcare, Inc. allocated to
technology for which feasibility had not been established as of the
acquisition date. Such charge was recorded in the third quarter ended December
31, 1996 in the originally filed financial statements (the "AHI Amendment"));
(ii) September 30, 1996 (as amended by Amendment No. 1 on Form 10-Q/A, filed
on February 13, 1997 to reflect Armor All and Millbrook as discontinued
operations; and as further amended by Amendment No. 2 on Form 10-Q/A, filed on
June 6, 1997 to reflect the AHI Amendment); and (iii) December 31, 1996 (as
amended by Amendment No. 1 on Form 10-Q/A, filed on June 6, 1997 to reflect
the AHI Amendment).
3. Current Reports on Form 8-K dated April 8, 1996, April 30, 1996, October
9, 1996 (as amended by Amendment No. 1 on Form 8-K/A filed December 20, 1996,
excluding Exhibit 99 thereto), November 22, 1996 (as amended by Amendment No.
1 on Form 8-K/A, filed on January 21, 1997 as further amended by Amendment No.
2 on Form 8-K/A, filed on April 28, 1997), December 10, 1996, January 13,
1997, February 5, 1997, February 12, 1997, February 24, 1997 and April 7,
1997.
2
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Shares made hereby shall be deemed
to be incorporated by reference in this Prospectus and to be part hereof from
the date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, upon the written or
oral request of such person, a copy of any or all of the foregoing documents
incorporated herein by reference, other than exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents). Requests for such documents shall be directed to Nancy A. Miller,
Vice President and Corporate Secretary, McKesson Corporation, McKesson Plaza,
One Post Street, San Francisco, California 94104 (telephone number (415) 983-
8301).
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Risk Factors,"
"Financial Review," "The Company" and elsewhere in this Prospectus or in the
information incorporated by reference herein may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 and as such may involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of McKesson to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such statements. McKesson also undertakes no obligation to update
these forward-looking statements.
RISK FACTORS
Risks Generally Associated with Acquisitions. An element of the Company's
growth strategy is to pursue strategic acquisitions that either expand or
complement the Company's business. Acquisitions involve a number of special
risks, including the diversion of management's attention to the assimilation
of the operations from other business concerns, difficulties in the
integration of operations and systems, the assimilation and retention of the
personnel of the acquired companies, challenges in retaining the acquired
businesses' customers and potential adverse short-term effects on the
Company's operating results. In addition, the Company may require additional
debt or equity financing for future acquisitions, which may not be available
on terms favorable to the Company, if at all. The inability of the Company to
successfully finance, complete and integrate strategic acquisitions in a
timely manner could have an adverse impact on the Company's results of
operations and its ability to effect a portion of its growth strategy.
Changing United States Healthcare Environment. In recent years, the
healthcare industry has undergone significant change driven by various efforts
to reduce costs, including potential national healthcare reform, trends toward
managed care, cuts in Medicare, consolidation of pharmaceutical and
medical/surgical supply distributors and the development of large,
sophisticated purchasing groups. The Company cannot predict whether any
healthcare reform efforts will be enacted and what effect or to what extent
any such reforms may have on the Company, its practices and products or its
customers and suppliers. Changes in governmental support of healthcare
services, the method by which such services are delivered, the prices for such
services or other legislation or regulations governing such services or
mandated benefits may have a material adverse effect on the Company's results
of operations.
3
<PAGE>
THE COMPANY
McKesson is the largest health care supply management company in
North America. The Company also develops and manages innovative marketing
programs for drug manufacturers and, through McKesson Water Products Company,
processes and markets pure drinking water.
The Company's objective is to become the world leader in health care supply
and comprehensive pharmaceutical management across the entire supply chain,
from manufacturer to patient. In pursuit of this goal, the Company has
completed a number of acquisitions in its core health care business. Since
late 1995, the Company has acquired General Medical Inc. ("General Medical"),
a leading distributor of medical and surgical supplies to the acute care,
physician care and extended care markets, the drug distribution business of
FoxMeyer Corporation ("FoxMeyer"), Automated Healthcare, Inc. ("AHI"), a
manufacturer of automated drug dispensing equipment for hospitals, and Ogden
BioServices Corporation (now "McKesson Bioservices Corporation"), a provider
of support services to government and commercial organizations engaged in drug
research and development.
The Company conducts its operations through two operating business segments
which generated annual sales in fiscal 1996 of $9.95 billion, approximately
97% of which were generated by the Health Care Services segment and
approximately 3% of which were generated primarily by McKesson's Water
Products (as hereinafter defined) business. In fiscal 1996, operating profits
for the Health Care Services business and the Water Products business were
$206.1 million and $39.6 million, respectively.
The principal executive offices of the Company are located at McKesson
Plaza, One Post Street, San Francisco, California 94104, and the telephone
number is (415) 983-8300.
RECENT ACQUISITIONS AND DISPOSITIONS
McKesson has recently undertaken several initiatives to further focus the
Company on its core health care business:
. In March 1997, McKesson disposed of Millbrook Distribution Services Inc.
("Millbrook") for an amount on an after-tax basis which approximates
Millbrook's book value. Millbrook is reflected as a discontinued
operation in the Company's financial statements. Millbrook is engaged in
distributing health and beauty care products, general merchandise, and
specialty foods to retail stores.
. In February 1997, McKesson acquired General Medical, the largest multi-
market distributor of medical and surgical supplies, for $775 million.
. In December 1996, the Company disposed of its 55% equity interest in
Armor All Products Corporation ("Armor All"), a non-health care business.
. In November 1996, the Company acquired FoxMeyer out of bankruptcy for
approximately $600 million.
. In April 1996, the Company acquired AHI, a business that specializes in
centralized robotic pharmaceutical dispensing systems for hospitals, for
$65 million.
. In December 1995, the Company acquired McKesson Bioservices Corporation,
a business that provides product marketing and support services for the
pharmaceutical industry, for approximately $20 million.
MCKESSON HEALTH CARE SERVICES
Through its Health Care Services segment, the Company is the largest
distributor of ethical and proprietary drugs and health and beauty care
products in North America, generating approximately 84% of the Company's
operating profits from continuing operations in fiscal 1996. The Company is
the market leader in its core U.S. drug distribution business. U.S. health
care operations also include Healthcare Delivery Systems, Inc. ("HDS") and
McKesson Bioservices Corporation, through which the Company provides marketing
and other support services to drug manufacturers, AHI, a business that
specializes in automated pharmaceutical dispensing systems for hospitals, and
Zee Medical, Inc., a distributor of first-aid products and supplies to
industrial and commercial customers. International operations include Medis
Health and Pharmaceutical Services Inc., a wholly-owned subsidiary and the
largest drug distributor in Canada, and the Company's 22.7% equity interest in
Nadro, S.A. de C.V., the largest drug distributor in Mexico.
The Company's domestic distribution operations supply drugs and health and
beauty care products to independent and chain drug stores, hospitals,
alternate-site facilities, food stores and mass merchandisers in all
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50 states. Using the names "Economost" and "Econolink" and a number of related
service marks, the Company has promoted electronic order entry systems and a
wide range of computerized merchandising and asset management services for
drug retailers and hospitals. The Company also supplies computer-based
practice management systems to drug retailers. The Company believes that its
financial strength, purchasing leverage, nationwide network of distribution
centers, and advanced logistics and information technologies provide
competitive advantages to its drug distribution operations. For example, the
Company uses Acumax(R), a computerized bar-code scanning system, to track
items in its warehouses. Acumax enables the Company to achieve order filling
and inventory accuracy levels of more than 99%, ensuring that the right
product arrives at the right time and place for both the Company's customers
and their patients.
Health Care Services serves three primary customer segments: retail
independent pharmacies, retail chains and institutional providers (including
hospitals, health care facilities and pharmacy service operators) which
represented approximately 41%, 30%, and 21%, respectively, of U.S. Health Care
Services revenues for fiscal 1996. A fourth customer category is
pharmaceutical manufacturers, which is managed by McKesson's Pharmaceutical
and Retail Services Business group.
INDEPENDENT PHARMACIES. In addition to distribution services, the Company
provides value added services to independent retail pharmacies through
management information systems, including inventory management, electronic
billing, current pricing and other financial management offerings. In
February 1996, McKesson launched the OmniLinkSM centralized pharmacy
technology platform and the associated CareMaxSM network of independent
pharmacies. The combined offering links independent pharmacies, creating a
"virtual chain" for contracting with pharmaceutical suppliers and managed
care organizations. As of December 31, 1996, OmniLink had been installed in
over 1,600 pharmacies.
OmniLink offers pharmacies streamlined transaction processing through
OmniLink's connectivity with managed care organizations, while promoting
compliance with managed care formularies and appropriate reimbursement from
managed care plans. The service also improves cash flow for pharmacies and
enhances pharmacy revenues through programs such as 24-hour advanced
funding of third-party reimbursements, prescription refill reminders,
patient direct marketing and distribution of coupons and samples for over-
the-counter products.
The Company currently has two pharmacy programs for independent
pharmacies--Valu-Rite(R), a voluntary cooperative program, and Health
Mart(R), a franchise program. Through Valu-Rite, the Company provides its
independent U.S. retail drug store customers with a common marketing
identity, group advertising, purchasing programs, promotional merchandise
and access to a pharmacy provider network. At December 31, 1996, over 5,200
stores were participating in the Valu-Rite program. Through Health Mart,
acquired as part of FoxMeyer, the Company provides its community
pharmacists with a franchise program. Currently, Health Mart has
approximately 700 franchisees. Together, Valu-Rite and Health Mart
pharmacies comprise approximately 20% of the nation's independent retail
pharmacies.
RETAIL CHAINS. Retail drug chains do business with the Company in three
ways: primary sourcing, secondary sourcing and dock-to-dock (warehousing).
In primary sourcing, a chain depends on the Company to supply its
logistics, warehousing and contract administration functions, much as the
Company performs primary distribution for all other retail customers. In
secondary sourcing, the Company "backs up" the chains' own warehouses with
deliveries on an as-needed basis. In dock-to-dock, the Company transfers
large-quantity (bulk) shipments from manufacturers to chains and provides
billing services.
INSTITUTIONAL BUSINESS. The Company, through its McKesson Health Systems
unit, provides drug distribution services, and related logistics and
management information systems support, to the institutional market, which
includes hospitals, alternate-sites and integrated health networks. The
acquisition of FoxMeyer strengthened the Company's position in the
institutional marketplace. Similarly, the completion of the acquisition of
General Medical further enhances the Company's competitiveness,
particularly in the fast-growing alternate-site segment.
MANUFACTURERS. Pharmaceutical and Retail Services develops innovative
marketing and distribution services to build and sustain sales for
manufacturers' pharmaceutical products. Through its HDS unit, this group
operates integrated systems for specialized delivery of biotech and other
high-cost pharmaceutical
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therapies. These systems manage manufacturer cost and information
requirements through financial assistance programs for patients,
reimbursement support and patient advocacy programs, product hot-lines,
pharmacy-based sampling and physician and patient information programs.
These services are also provided to manufacturers on a stand-alone basis
outside of integrated service systems. Through McKesson Bioservices
Corporation, this group also provides support services to commercial, non-
profit and governmental organizations engaged in drug development and
biomedical research including biological repository management, clinical
trials support and regulatory process management services.
McKesson also provides a key service to drug manufacturers with McKesson
Select GenericsSM, an enhancement of the Company's Multi-Source Complete(R)
generic drug program which was launched in May 1996. Through the Select
Generics program, retail customers have access to a broad line of over
1,300 generic items, and single suppliers are chosen for each item, thereby
offering to manufacturers the advantage of exclusivity and compliance.
GENERAL MEDICAL ACQUISITION
On February 21, 1997, McKesson acquired General Medical for approximately
$775 million, including $347 million for the equity, half in the Company's
Common Stock and half in cash, and the assumption of approximately $428
million in debt. The acquisition of General Medical extends the Company's
product line to include medical and surgical supplies in addition to the drugs
and health and beauty care products it currently distributes. The combination
of McKesson and General Medical creates a strong force to address the
increasingly complex clinical supply needs of physicians, extended-care
facilities and integrated health care networks.
General Medical is the nation's leading supplier of medical-surgical
supplies to the full range of alternate-site health care facilities, including
physicians and clinics (primary care), long-term care and home-care sites
(extended care), and is the third largest distributor of medical-surgical
supplies to hospitals. In the year ended December 31, 1995, General Medical
had revenues of approximately $1.5 billion, of which 58% were derived from the
acute care market, 31% from primary care and 11% from extended care. In
addition to marketing to each market segment separately, General Medical
emphasizes sales to these three market segments through integrated health care
networks which operate health care facilities across the market spectrum.
General Medical distributes a broad array of products, comprising
approximately 130,000 products supplied by over 4,000 medical and surgical
product manufacturers, through a 700-person sales force to more than
200,000 care providers nationwide, including 500 account managers calling on
physicians. Additionally, General Medical offers a variety of value-added
services to its customers, particularly in the area of cost containment and
inventory management. The acquisition of General Medical is a major step
forward in solidifying the Company's position as the world leader in health
care supply management.
FOXMEYER ACQUISITION
Prior to its acquisition by the Company, FoxMeyer's drug distribution
business was the fourth largest in the United States. The acquisition of
FoxMeyer pairs the Company's financial capabilities and information technology
expertise with the substantial customer base of FoxMeyer and strengthens the
Company's position in all three customer segments (health care institutions,
retail independents and retail chains). The acquisition also gives the Company
access to new customers and opportunities for consolidation economics,
particularly cost reduction and distribution network reconfiguration.
MCKESSON WATER PRODUCTS COMPANY
McKesson Water Products Company ("Water Products") is a leading provider in
the $3.4 billion bottled water industry in the United States. Except in the
State of Washington, it is the largest bottled water company in the geographic
markets in which it competes. In fiscal 1996, Water Products generated
approximately $40 million in pretax operating profit, and its operating margin
was 15%. Water Products is primarily engaged in the processing and sale of
bottled drinking water delivered to more than 500,000 homes and businesses
under its Sparkletts(R), Alhambra(R), and Crystal(TM) brands in California,
Arizona, Nevada, Oklahoma, Washington and Texas. It also sells packaged water
through retail stores in approximately 40 states.
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USE OF PROCEEDS
McKesson will not receive any of the proceeds from the sale of the Shares by
the Selling Stockholders.
SELLING STOCKHOLDERS
The following table sets forth certain information as of the date of this
Prospectus with respect to shares of Common Stock owned by the Selling
Stockholders which are covered by this Prospectus.
<TABLE>
<CAPTION>
COMMON STOCK OWNERSHIP
PRIOR TO THE OFFERING
--------------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENTAGE
--------------------------- ------------ -------------
<S> <C> <C>
Kelso Investment Associates IV, L.P. .................. 1,774,034 3.87%
Kelso Equity Partners II, L.P. ........................ 39,910 .09%
Chase Equity Associates, L.P. ......................... 294,557 .64%
John Rutledge Partners, L.P. .......................... 251,930 .55%
Princes Gate Investors, L.P. .......................... 174,404 .38%
Acorn Partnership I, L.P. ............................. 20,748 .05%
PGI Investments Limited................................ 20,541 .04%
PGI Sweden AB.......................................... 20,541 .04%
Gregor Von Opel........................................ 10,272 .02%
The Louis and Patricia Kelso Trust..................... 3,612 .01%
William A. Marquard.................................... 2,890 .006%
The Frank T. Nickell IRA............................... 14,450 .03%
David M. Roderick...................................... 4,335 .01%
George L. Shinn........................................ 1,445 .003%
Steven B. Nielsen(1)................................... 60,885 .13%
F. DeWight Titus(1).................................... 85,293 .19%
Donald B. Garber(1).................................... 11,891 .03%
</TABLE>
- --------
(1) Excludes (i) 6000 shares of restricted Common Stock held by Steven B.
Nielsen subject to possible forfeiture under McKesson's 1994 Stock Option
and Restricted Stock Plan (the "1994 Plan") and (ii) options to acquire
shares of Common Stock under the 1994 Plan held by Steven B. Nielsen, F.
DeWight Titus and Donald B. Garber.
The Chase Manhattan Bank, N.A., an affiliate of Chase Equity Associates,
L.P., serves as trustee for the McKesson Corporation Profit-Sharing Investment
Plan (the "PSIP"). As of June 2, 1997, 10,126,057 shares of Common Stock were
held in the PSIP.
Mr. Nielsen has been Chairman of the Board and Chief Executive Officer of
General Medical since its formation in May 1994 and of GM Holdings, Inc., a
Delaware corporation ("Holdings") and a wholly owned subsidiary of General
Medical and of McKesson General Medical Corp. (formerly known as General
Medical Corporation), a Virginia corporation ("MGMC") and a wholly owned
subsidiary of Holdings since September 1993. He also served as President of
MGMC from December 1988 to April 1997. In addition, Mr. Nielsen has been a
Vice President of the Company since March 26, 1997. Mr. Titus has been Vice
Chairman and a director of General Medical, Holdings and MGMC since October
1994 and has also served as Executive Vice President since February 1996. Mr.
Garber has been Senior Vice President and Chief Financial Officer of General
Medical since its formation in May 1994 and of Holdings and MGMC since August
1989.
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DESCRIPTION OF CAPITAL STOCK
The description of the Company's capital stock and of certain provisions of
Delaware law do not purport to be complete and are subject to and qualified in
their entirety by reference to the Company's Restated Certificate of
Incorporation (the "Certificate") and Restated By-Laws (the "By-Laws") and
Delaware law, and, with respect to certain rights of holders of shares of
Common Stock, the Rights Agreement (as hereinafter defined). Copies of such
documents have been filed with the Commission.
As of the date hereof, the capital stock of McKesson consists of 200,000,000
authorized shares of Common Stock and 100,000,000 authorized shares of series
preferred stock.
COMMON STOCK
As of June 2, 1997, there were 45,897,016 shares of Common Stock issued and
outstanding. The holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and
in such amounts as the McKesson Board of Directors (the "Board") may from time
to time determine. The shares of Common Stock are neither redeemable nor
convertible, and the holders thereof have no preemptive or subscription rights
to purchase any securities of McKesson. Upon liquidation, dissolution or
winding up of McKesson, the holders of Common Stock are entitled to receive
the assets of McKesson, which are legally available for distribution, after
payment of all debts, other liabilities and any liquidation preferences of
outstanding preferred stock. Each outstanding share of Common Stock is
entitled to one vote on all matters submitted to a vote of stockholders. There
is no cumulative voting.
In February 1997, McKesson Financing Trust issued an aggregate of 4,123,720
5% Trust Securities (each, a "Trust Security" and collectively, the "Trust
Securities"). Each Trust Security is convertible into Common Stock at any time
beginning May 21, 1997 and prior to the close of business on the business day
prior to June 1, 2027 (or prior to the date of redemption of the Trust
Security), at the option of the holder, at the rate of .6709 shares of Common
Stock for each Trust Security (equivalent to a conversion price of $74.53 per
share of Common Stock), subject to adjustment in certain circumstances.
SERIES PREFERRED STOCK
As of June 2, 1997, there were no shares of series preferred stock issued
and outstanding. The Board is authorized to issue series preferred stock in
classes or series and to fix the designations, preferences, qualifications,
limitations, or restrictions of any class or series with respect to the rate
and nature of dividends, the price and terms and conditions on which shares
may be redeemed, the amount payable in the event of voluntary or involuntary
liquidation, the terms and conditions for conversion or exchange into any
other class or series of the stock, voting rights and other terms.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Certificate and By-Laws of McKesson contain certain provisions that may
be deemed to have an anti-takeover effect and may delay, deter or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
Pursuant to the Certificate, the Board is divided into three classes serving
staggered three-year terms. Directors can be removed from office only for
cause and only by the affirmative vote of the holders of at least a majority
of the voting power of the then outstanding shares of any class or series of
capital stock of the Company entitled to vote generally in the election of
directors. Vacancies and newly created directorships on the Board may be
filled only by a majority of the remaining directors or by the plurality vote
of the stockholders.
The Certificate also provides that any action required or permitted to be
taken by the holders of Common Stock may be effected only at an annual or
special meeting of such holders, and that stockholders may act in lieu of such
meetings only by unanimous written consent. The By-Laws provide that special
meetings of holders of Common Stock may be called only by the Chairman or the
President of the Company or the Board. Holders of Common Stock are not
permitted to call a special meeting or to require that the Board call a
special meeting of stockholders.
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The By-Laws establish an advance notice procedure for the nomination, other
than by or at the direction of the Board, of candidates for election as
directors as well as for other stockholder proposals to be considered at
annual meetings of stockholders. In general, notice of intent to nominate a
director or raise business at such meetings must be received by the Company
not less than 60 nor more than 90 days prior to the date of the annual meeting
and must contain certain specified information concerning the person to be
nominated or the matters to be brought before the meeting and concerning the
stockholder submitting the proposal.
The Certificate also provides that certain provisions of the By-Laws may
only be amended by the affirmative vote of the holders of 75% of the shares of
the Company outstanding and entitled to vote. The Certificate also provides
that, in addition to any affirmative vote required by law, the affirmative
vote of holders of 80% of the voting stock of the Company and two-thirds of
the voting stock other than voting stock held by an interested stockholder
shall be necessary to approve certain business combinations proposed by an
interested stockholder.
The foregoing summary is qualified in its entirety by the provisions of the
Certificate and By-Laws, copies of which have been filed with the Commission.
RIGHTS PLAN
Pursuant to the Company's Rights Agreement (as defined below), the Board
declared a dividend distribution of one right (a "Right") for each outstanding
share of Common Stock to stockholders of record of the Company at November 1,
1994 (the "Record Date"). Each Right entitles the registered holder to
purchase from the Company a unit consisting of one one-hundredth of a share of
Series A Junior Participating Preferred Stock (the "Series A Preferred Stock")
at a purchase price of $100 per unit. The terms of the Rights are set forth in
a Rights Agreement between the Company and a Rights Agent (the "Rights
Agreement"), a copy of which is filed with the Commission. The following
summary outlines certain provisions of the Rights Agreement and is qualified
by reference to the full text of the form of the Rights Agreement.
The Rights are attached to all Common Stock certificates representing shares
outstanding at the Record Date and shares issued between the Record Date and
the Distribution Date (as hereinafter defined), and no separate rights
certificates (the "Rights Certificates") have been distributed. The Rights
will separate from the Common Stock, separate Rights Certificates will be
issued and a distribution date (the "Distribution Date") will occur upon the
earlier to occur of (i) ten business days following the date of a public
announcement that there is an Acquiring Person (as defined below) (such date,
the "Stock Acquisition Date"), (ii) ten business days following commencement
of a tender or exchange offer that would result in the offeror beneficially
owning 15% or more of the Common Stock or (iii) ten business days after the
Board determines that the ownership of 10% or more of the Company's
outstanding Common Stock by a person is (A) intended to cause the Company to
repurchase the Common Stock beneficially owned by such person or (B) is
causing, or is reasonably likely to cause, a material adverse impact on the
Company.
The term "Acquiring Person" means any person who, together with affiliates
and associates, acquires beneficial ownership of shares of Common Stock
representing 15% or more of the Common Stock, but shall not include the
Company, any subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any person or entity
organized, appointed or established by the Company for or pursuant to the
terms of such plan.
In the event that a person becomes an Acquiring Person (except pursuant to
an offer for all outstanding shares of Common Stock which the independent
directors determine to be fair to and otherwise in the best interests of the
Company and its stockholders), each holder of a Right will thereafter have the
right to receive, upon exercise, Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a calculated value
equal to two times the exercise price of the Right. Notwithstanding the
foregoing, following the occurrence of such event, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by an Acquiring Person and certain related persons and
transferees will be null and void. However, Rights are not exercisable
following the occurrence of such event until such time as the Rights are no
longer redeemable as set forth below.
The Rights expire on September 14, 2004, unless redeemed earlier by the
Board.
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At any time prior to the tenth day following the Stock Acquisition Date, the
Company may redeem the Rights, in whole, but not in part, at a price of $.01
per Right.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including without limitation, the right to
vote or to receive dividends.
In general, the Rights Agreement may be amended by the Board (i) prior to
the Distribution Date in any manner, and (ii) on or after the Distribution
Date in certain respects including (a) to shorten or lengthen any time period
and (b) in a manner not adverse to the interests of Rights holders. However,
amendments extending the redemption period must be made while the Rights are
still redeemable.
The Rights have certain anti-takeover effects and will cause substantial
dilution to a person or group that attempts to acquire the Company on terms
not approved by the Board. The Rights should not interfere with any merger or
other business combination approved by the Board, since the Board may redeem
the Rights as provided above.
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
The Company is subject to the "business combination" statute of the Delaware
General Corporation Law (Section 203). In general, such statute prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with any "interested stockholder" for a period of three years after the date
of the transaction in which the person became an "interested stockholder,"
unless (i) such transaction is approved by the board of directors prior to the
date the interested stockholder obtains such status, (ii) upon consummation of
such transaction, the "interested stockholder" beneficially owned at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) the "business
combination" is approved by the board of directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the "interested
stockholder." A "business combination" includes mergers, asset sales and other
transactions resulting in financial benefit to the "interested stockholder."
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) beneficially 15% or more of
a corporation's voting stock. The statute could prohibit or delay mergers or
other takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
The Company's authorized but unissued shares of Common Stock and series
preferred stock may be issued without additional stockholder approval and may
be utilized for a variety of corporate purposes, including future offerings to
raise additional capital or to facilitate corporate acquisitions.
The issuance of series preferred stock could have the effect of delaying or
preventing a change in control of the Company. The issuance of series
preferred stock could decrease the amount of earnings and assets available for
distribution to the holders of Common Stock or could adversely affect the
rights and powers, including voting rights, of the holders of the Common
Stock. In certain circumstances, such issuance could have the effect of
decreasing the market price of the Common Stock.
One of the effects of the existence of unissued and unreserved Common Stock
or series preferred stock may be to enable the Board to issue shares to
persons friendly to current management which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity
of management. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of the Company.
10
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The Company plans to issue additional shares of Common Stock (i) upon the
exercise of options which have been granted or which may be granted in the
future to directors, officers and employees of the Company and (ii) upon
conversion of the Trust Securities. The Company does not currently have any
plans to issue shares of series preferred stock, although, 10,000,000 shares
of Series A Preferred Stock have been designated pursuant to the Company's
Rights Plan.
LIMITATION OF DIRECTORS LIABILITY
The Certificate contains a provision that limits the liability of McKesson's
directors for monetary damages for breach of fiduciary duty as a director to
the fullest extent permitted by the Delaware General Corporation Law. Such
limitation does not, however, affect the liability of a director (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or purchases and (iv) for any
transaction from which the director derives an improper personal benefit. The
effect of this provision is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of the fiduciary
duty of care as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (i)
through (iv) above. This provision does not limit or eliminate the rights of
the Company or any stockholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of
care. In addition, the directors and officers of the Company have
indemnification protection.
PLAN OF DISTRIBUTION
The Selling Stockholders or their respective distributees, pledgees, donees,
transferees or other successors in interest may offer Shares from time to time
depending on market conditions and other factors, in one or more transactions
on the NYSE, PE or other national securities exchanges on which the Shares are
traded, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at negotiated prices or at fixed prices. The
Shares may be offered in any manner permitted by law, including through
underwriters, brokers, dealers or agents, and directly to one or more
purchasers. Sales of Shares may involve (i) sales to underwriters who will
acquire Shares for their own account and resell them in one or more
transactions at fixed prices or at varying prices determined at time of sale,
(ii) block transactions in which the broker or dealer so engaged will attempt
to sell the Shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction, (iii) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account, (iv)
an exchange distribution in accordance with the rules of any such exchange,
and (v) ordinary brokerage transactions and transactions in which a broker
solicits purchasers. Brokers and dealers may receive compensation in the form
of underwriting discounts, concessions or commissions from the Selling
Stockholders and/or purchasers of Shares for whom they may act as agent (which
compensation may be in excess of customary commissions). The Selling
Stockholders and any broker or dealer that participates in the distribution of
Shares may be deemed to be underwriters and any commissions received by them
and any profit on the resale of Shares positioned by a broker or dealer may be
deemed to be underwriting discounts and commissions under the Securities Act.
In the event any Selling Stockholder engages an underwriter in connection with
the sale of the Shares, to the extent required, a Prospectus Supplement will
be distributed, which will set forth the number of Shares being offered and
the terms of the offering, including the names of the underwriters, any
discounts, commissions and other items constituting compensation to
underwriters, dealers or agents, the public offering price and any discounts,
commissions or concessions allowed or reallowed or paid by underwriters to
dealers.
In addition, the Selling Stockholders may from time to time sell Shares in
transactions under Rule 144 promulgated under the Securities Act.
Pursuant to the Registration Rights Agreement, dated as of January 28, 1997,
by and among the Company and the Selling Stockholders (the "Registration
Rights Agreement"), the Company will pay all registration
11
<PAGE>
expenses in connection with all registrations of the Shares. The Selling
Stockholders and the Company have agreed to indemnify each other against
certain civil liabilities, including certain liabilities under the Securities
Act.
EXPERTS
The consolidated financial statements of McKesson and the related financial
statement schedule incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K/A for the year ended March 31, 1996 and
the consolidated financial statements of FoxMeyer Corporation for the year
ended March 31, 1996 incorporated in this Prospectus by reference from the
Company's Current Report on Form 8-K/A filed with the Commission on April 28,
1997 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports incorporated herein by reference (which report dated
May 13, 1996 (December 31, 1996 as to Notes 8 and 17) on the Company's
consolidated financial statements expresses an unqualified opinion and
includes an explanatory paragraph relating to a change in the Company's method
of accounting for post employment benefits to conform with Statement of
Financial Accounting Standards No. 112 and which report on FoxMeyer
Corporation's consolidated financial statements dated June 28, 1996 (March 18,
1997 as to paragraph seven of Note Q), expresses an unqualified opinion and
includes an explanatory paragraph relating to the sale of the principal assets
of FoxMeyer Corporation and its Chapter 7 bankruptcy filing). Such
consolidated financial statements and financial statement schedule have been
so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for McKesson
by Ivan D. Meyerson, Vice President and General Counsel of McKesson. Mr.
Meyerson owns shares of, and holds options to purchase, in the aggregate, less
than 1% of McKesson's Common Stock.
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