Hard agree, and not just because I'm a spreadsheet nerd. Why are we all here? Isn't it in the service…
McKesson Spins Off Its Technology Solutions Business with Change Healthcare
McKesson announced this morning that it will move its Technology Solutions business into a new company that it will co-own with Change Healthcare (the former Emdeon), with plans to take the new company public sometime in 2017.
McKesson Chairman and CEO John Hammergren said in statement, “This is a bold, innovative transaction that creates a company with an enhanced ability to help customers address their increasingly complex financial and clinical challenges. The new company will establish a more efficient suite of end-to-end payment and claims solutions, as well as clinical capabilities, while unlocking the value of our MTS businesses in a tax-efficient manner. We look forward to partnering with Change Healthcare’s management team and employees to create this new enterprise and to help customers reduce complexity, lower costs, and ultimately provide better care.”
McKesson will receive cash proceeds of $1.25 billion and will own 70 percent of the separate company. Change Healthcare, which is contributing all of its assets except for some minor pharmacy components to the new company, will get $1.75 billion in cash and a 30 percent ownership stake.
McKesson will retain its RelayHealth Pharmacy business. It will also keep its Enterprise Information Solutions division, but will “explore strategic alternatives” for that product line. That means that McKesson’s go-forward hospital information system, Paragon, is up for grabs.
McKesson’s John Hammergren will serve as chairman of the new company, while Change Healthcare President and CEO Neil de Crescenzo will become CEO.
The new company will take on $6.1 billion in debt to fund the transaction, of which $2.7 billion will be used to pay down existing Change Healthcare debt.
So…Blackstone finally dumps Healtheon/WebMD/Emdeon/Change onto McKesson? Surprising Change would dump all assets into a company they’ll only have a 30% stake in. HISTalk followers–what’s the take on this?
Not sure what bank would lend that particular group of people 6.1B.
What a joke. What a mess. This reminds me of Microsoft and GE spinning off their (failing) HIT businesses into a joint venture, Caradigm, which brought to the industry a new name and a nice website, but still with the same challenged solutions. I wouldn’t want to be an employee of either Change (Emdeon) or McKesson HIT now.
If you watch Bearing Sea Gold this seems like the kind of deal Emily finally was able to make with Zeke to save their sinking fortunes because their actual enterprises were worth far less than their original investments. Zeke (McKesson) simply had more leverage than Emily (Blackstone) and got the larger share going forward in the new combined venture I don’t think Zeke and Emily will get any tax breaks or write downs though. McKesson Paragon appears to be Vernon’s operation. Lots of expensive parts that don’t work very well together that nobody wants to work for and nobody will buy.
From the most recent Change Healthcare 10-K:
If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of such actions on a timely basis or on terms satisfactory to us or at all.
Oh my gosh, that is a lot of bloviating buzzwords, even by Hammergren’s standards. …”reduce complexity, lower costs, and ultimately provide better care”. Does he really expect anyone to believe that? How about, “abandon entire product lines, siphon billions for executive bonuses, layoff front line staff, and lie to customers about R&D.
Anybody who works in the HIT sector in Atlanta will tell you McKesson has been steadily shedding employees for the past 5 years.
This amounts to a colossal pile of Technical Debt to go with its Financial Debt…..lipstick on a very large pig IMO