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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The excess of the purchase price and the noncontrolling interests over the fair value of the acquired net
assets has been allocated to goodwill, which primarily reflects the expected future benefits to be realized upon
integrating the business. Most of the goodwill is not expected to be deductible for tax purposes.
Domination and Profit and Loss Transfer Agreement
On May 22, 2014, Celesio and McKesson, through its wholly-owned subsidiary, McKesson Deutschland
GmbH & Co. KGaA (“McKesson Deutschland,” formerly known as Dragonfly GmbH & Co. KGaA), entered
into the domination and profit and loss transfer agreement (the “Domination Agreement”) subject to Celesio
shareholder approval and German registration requirements. Under the Domination Agreement, Celesio
subordinates its management to McKesson and undertakes to transfer all of its annual profits to McKesson, and
McKesson undertakes to compensate any annual losses incurred by Celesio and to grant, subject to a potential
court review, the noncontrolling shareholders of Celesio (i) an annual recurring compensation of €0.83 per
Celesio share (“Compensation Amount”), (ii) a one-time dividend for Celesio’s fiscal year ended December 31,
2014 of €0.83 per Celesio share reduced accordingly for any dividend paid by Celesio in relation to its fiscal year
ended December 31, 2014 (“Guaranteed Dividend”) and (iii) a right to put (“Put Right”) their Celesio shares at
€22.99 per share increased annually for interest in the amount of 5 percentage points above a base rate published
by the German Bundesbank semiannually, less any Compensation Amount or Guaranteed Dividend already paid
in respect of the relevant time period (“Put Amount”). The Domination Agreement does not have an expiration
date and can be terminated by McKesson without cause in writing no earlier than March 31, 2020. The
Domination Agreement was approved at the general shareholders’ meeting of Celesio on July 15, 2014, approved
by the Stuttgart Higher Regional Court for registration on December 2, 2014, and was registered in the
commercial register of Celesio at the local court of Stuttgart on December 2, 2014. As a result, McKesson
obtained the ability to pursue integration of the two companies on December 2, 2014.
Under the Domination Agreement, the noncontrolling shareholders of Celesio no longer participate in their
percentage ownership of Celesio’s profits and losses, but instead have the right to receive the one-time
Guaranteed Dividend and prospectively the Compensation Amount.
Subsequent to the Domination Agreement’s registration, certain noncontrolling shareholders of Celesio
initiated appraisal proceedings (“Appraisal Proceedings”) with the Stuttgart Higher Regional Court to challenge
the Compensation Amount, Guaranteed Dividend and/or Put Amount. As long as any Appraisal Proceedings are
pending, the Compensation Amount, Guaranteed Dividend and/or Put Amount will be paid as specified currently
in the Domination Agreement. If any such Appraisal Proceedings result in an adjustment to the Compensation
Amount, Guaranteed Dividend and/or Put Amount, McKesson Deutschland would be required to make certain
additional payments for any shortfall to all Celesio noncontrolling shareholders who previously received the
Guaranteed Dividend, Compensation Amount and/or Put Amount. The Put Right specified in the Domination
Agreement may be exercised until two months after the announcement regarding the end of the Appraisal
Proceedings. In addition, if the Domination Agreement is terminated, the Put Right may be exercised for a two-
month period after the date of termination.
On August 14, 2014, Magnetar Capital filed a lawsuit against Celesio with the Stuttgart Regional Court
claiming that the shareholders’ approval of the Domination Agreement was void under the German Stock
Corporation Act (“Main Proceedings”). As the Domination Agreement was registered in the commercial register
of Celesio at the local court of Stuttgart, Germany on December 2, 2014 following the approval for registration
by the Stuttgart Higher Regional Court, the outcome of the Main Proceedings will not impact the effectiveness of
the Domination Agreement and thus will not impact McKesson’s ability to direct the activities of Celesio. The
court is scheduled to issue a decision on the Main Proceedings on June 16, 2015.
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