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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
October 19, 1998
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(Date of report)
October 17, 1998
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(Date of earliest event reported)
McKESSON CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-13252 94-3207296
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(State of Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
McKesson Plaza
One Post Street
San Francisco, California 94104
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(Address of Principal Executive Offices) (Zip Code)
(415) 983-8300
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On October 18, 1998, McKesson Corporation ("McKesson") and HBO & Company
("HBOC") announced that a definitive merger agreement has been signed for
McKesson to acquire HBOC. Terms of the merger call for each HBOC stockholder to
receive 0.37 shares of McKesson common stock for each share of HBOC common stock
in a tax-free exchange. The merger, which is subject to regulatory approval,
approval by the stockholders of the two companies, and certain 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 concerning the merger
is contained in the press release regarding this announcement, the text of which
is set forth in Exhibit (99) to this Current Report on Form 8-K and is hereby
incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
(99) Press Release issued by McKesson Corporation dated
October 18, 1998.
SIGNATURE
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.
Date: October 19, 1998
McKESSON CORPORATION
By: /s/ Nancy A. Miller
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Name: Nancy A. Miller
Title: Vice-President and Secretary
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EXHIBIT INDEX
EXHIBIT
NO. TITLE
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(99) Press Release issued by McKesson Corporation on October 18, 1998.
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EXHIBIT 99
[LETTERHEAD OF MCKESSON CORPORATION]
NEWS RELEASE
McKESSON
Contacts: McKesson HBOC
Media Monica Brown
----- (770) 668-5926
Larry Kurtz Beth Brown
(415) 983-8418 (770) 393-6587
Kim Sankaran
(415) 983-8416
Investor Relations
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Janet Bley
(415) 983-9357
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
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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.
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
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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 $23 billion. Since January 1, 1996, HBOC and McKesson
have ranked among the leading companies in total shareholder return.
McCall will become chairman of McKesson HBOC. Pulido will become president
and chief executive officer of the new company. The McKesson HBOC Board of
Directors will have 10 members, five from the current board of McKesson and
five from the current board of HBOC. An Operating Committee will be
established, consisting of McCall, Pulido and:
Albert J. Bergonzi, group president, HCIS,
Jay P. Gilbertson, group president, HCIS,
John H. Hammergren, group president, Health Systems,
Richard H. Hawkins, vice president, chief financial officer,
David L. Mahoney, group president, Pharmaceutical Services and
International, and
Mark T. Majeske, group president, Customer Operations.
The two companies will retain the employee base that has played a key role in
their growth and the creation of shareholder value. The combined company will
have significant executive management and employee ownership.
The corporate headquarters of the combined company will be in San Francisco.
Atlanta will be headquarters for the healthcare information business. The
combined company will have approximately 20,300 employees across the United
States, Canada and Europe, approximately 2,500 of whom are located in San
Francisco or Atlanta.
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Profile of the combined company
McKesson HBOC
HBOC McKesson Pro Forma
Financials
($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 shares $.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 350 50 400
Automation and Information
- --Hospital Pharma and Med-Surg -- 200 200
- --Payor 60 -- 60
- --Physicians 50 550 600
- --Extended Care 20 150(d) 170
- --Retail -- 500 500
Countries 9 3 11
(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: http://www.mckesson.com.
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.
# # #
McKesson news releases are available at no charge through McKesson's
NewsOnDemand fax service. To immediately receive an index of available
releases, call 1-800-344-6495 and press 2.
