McKesson 2006 Annual Report Download - page 39

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Acquisitions and Investments
We made the following acquisitions and investments:
During the last three years we also completed a number of other acquisitions and investments within all three of our operating segments.
Purchase prices have been allocated based on estimated fair values at the date of acquisition and, for certain recent acquisitions, may be subject
to change. Pro forma results of operations for our business acquisitions have not been presented because the effects were not material to the
consolidated financial statements on either an individual or aggregate basis.
Refer to Financial Note 2, “Acquisitions and Investments,” to the accompanying consolidated financial statements for further discussions
regarding our acquisitions and investing activities.
35
– In the second quarter of 2006, we acquired substantially all of the issued and outstanding stock of D&K of St. Louis, Missouri, for an
aggregate cash purchase price of $479 million, including the assumption of D&K’s debt. D&K is primarily a wholesale distributor of
branded and generic pharmaceuticals and over-the-counter health and beauty products to independent and regional pharmacies, primarily in
the Midwest. The results of D&K’s operations have been included in the consolidated financial statements within our Pharmaceutical
Solutions segment since the acquisition date.
Approximately $172 million of the purchase price has been assigned to goodwill, none of which is expected to be deductible for tax
purposes. Included in the purchase price are acquired identifiable intangibles of $43 million primarily representing customer lists and not-to-
compete covenants which have an estimated weighted-average useful life of nine years.
– Also in the second quarter of 2006, we acquired all of the issued and outstanding shares of Medcon, an Israeli company, for an aggregate
purchase price of $82 million. Medcon provides web-based cardiac image and information management services to healthcare providers.
Approximately $66 million of the purchase price was assigned to goodwill, none of which is deductible for tax purposes and $20 million
was assigned to intangibles which represent technology assets and customer lists which have an estimated weighted-average useful life of
four years. The results of Medcon’s operations have been included in the consolidated financial statements within our Provider Technologies
segment since the acquisition date.
– In the third quarter of 2005, we invested $33 million in return for a 79.7% interest in Pahema, S.A. de C.V. (“Pahema”), a Mexican holding
company. Two additional investors, owners of approximately 30% of the outstanding shares of Nadro (collectively, “investors”), contributed
$10 million for the remaining interest in Pahema. In December 2004, Pahema completed a 6.50 Mexican Pesos per share, or approximately
$164 million, tender offer for approximately 284 million shares (or approximately 46%) of the outstanding publicly held shares of the
common stock of Nadro. Pahema financed the tender offer utilizing the cash contributed by the investors and us, and borrowings totaling
1.375 billion Mexican Pesos, in the form of two notes with Mexican financial institutions. Prior to the tender offer, the Company owned
approximately 22% of the outstanding common shares of Nadro. During the first half of 2006, we merged Pahema into Nadro and the
common stock of Pahema was exchanged for the common stock of Nadro. After the completion of the merger, we own approximately 48%
of Nadro.
– In the first quarter of 2005, we acquired all of the issued and outstanding shares of MMC, of New Britain, Connecticut, for an aggregate
cash purchase price of $37 million. MMC is an Internet-enabled, multi-channel marketer and distributor of medical-surgical and
pharmaceutical products to non-hospital provider settings. Approximately $19 million of the purchase price was assigned to goodwill, none
of which was deductible for tax purposes. The results of MMC’s operations have been included in the consolidated financial statements
within our Medical-Surgical Solutions segment since the acquisition date.