On March 10, 2020 McKesson Corporation (NYSE:MCK) reported that its previously announced offer to stockholders to exchange their shares of McKesson common stock on a per-share-basis for 11.4086 shares of PF2 SpinCo, Inc. ("SpinCo") common stock expired at 11:59 p.m., New York City time, on March 9, 2020, and, based on preliminary results, the exchange offer was oversubscribed (Press release, McKesson, MAR 10, 2020, View Source [SID1234555378]). The exchange offer to split-off SpinCo, which holds McKesson’s interest in Change Healthcare LLC ("Change Healthcare"), is part of McKesson’s agreement with Change Healthcare Inc. (NASDAQ:CHNG) ("Change") to merge SpinCo with and into Change (the "Merger").
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
According to the exchange agent for the exchange offer, Equiniti Trust Company, 98,165,418 shares of McKesson common stock were tendered prior to the expiration of the exchange offer, including 65,256,714 shares of McKesson common stock validly tendered and 32,908,704 shares of McKesson common stock that were tendered by notice of guaranteed delivery. McKesson has accepted 15,426,537 of the tendered shares of McKesson common stock in exchange for 175,995,192 shares of SpinCo common stock.
Immediately following the consummation of the exchange offer, and by means of the merger of SpinCo with and into Change, each outstanding share of SpinCo common stock will be converted into one share of Change common stock (with cash in lieu of fractional shares).
Because the exchange offer was oversubscribed, McKesson accepted tendered shares of McKesson common stock on a pro rata basis in proportion to the total number of shares tendered and not validly withdrawn. Stockholders who owned fewer than 100 shares of McKesson common stock, or an "odd lot," and who validly tendered all of their shares are not subject to proration in accordance with the terms of the exchange offer.
Based on the total number of shares of McKesson common stock that were reported as tendered prior to the expiration of the exchange offer, it is estimated that approximately 14.70% of the tendered shares of McKesson common stock that are subject to proration will be exchanged for shares of SpinCo common stock, assuming all shares tendered by guaranteed delivery procedures are delivered under the terms of the exchange offer. The preliminary proration factor is subject to change based on the number of tendered shares that satisfy the guaranteed delivery procedures.
McKesson expects to announce the final proration factor as soon as possible following the expiration of the guaranteed delivery period, which will occur on March 11, 2020. Promptly after the final proration factor is announced, shares of McKesson common stock tendered but not accepted for exchange will be returned to the tendering stockholders in book-entry form. Also at that time, the exchange agent for the exchange offer will deliver to Change’s transfer agent a final stockholder list for SpinCo common stock to be received by tendering McKesson stockholders whose shares were accepted for exchange in the exchange offer. Change’s transfer agent will use the final stockholder list to credit such tendering McKesson stockholders with whole shares of Change common stock. Fractional shares of Change common stock deliverable to tendering McKesson common stock holders will be aggregated and sold in the open market by Change’s transfer agent, or otherwise as reasonably directed by McKesson within 20 business days after the effective time of the Merger. Checks in lieu of fractional shares will thereafter be delivered to such tendering McKesson common stock stockholders by Change’s transfer agent, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable.
In connection with the transactions, Goldman Sachs & Co. LLC is acting as financial advisor and Davis Polk & Wardwell LLP is acting as legal advisor to McKesson.