BX Blackstone Inc

By Tess Stynes 

Health-care giant McKesson Corp. on Tuesday said it plans to form a health-care information-technology joint venture that it expects to take public later in an initial public offering.

The planned company will combine most of McKesson's technology segment with the bulk of Change Healthcare Holdings Inc., which is majority owned by Blackstone Group LP.

McKesson would own 70% of the new company, with the rest owned by Change Healthcare's shareholders, including Blackstone and Hellman & Friedman LLC.

The new company has received commitments for $6.1 billion of debt, with proceeds targeted to repay $2.7 billion of Change Healthcare's debt, as well as make payments of $1.25 billion to McKesson and $1.75 billion to Change Healthcare's holders.

The deal excludes McKesson's RelayHealth Pharmacy business and its enterprise-information segment. McKesson separately said it plans to explore strategic options for the EIS unit.

The divestiture will dismantle what has been a high-margin business for McKesson, but one overshadowed by the company's growing pharmaceutical distribution business. McKesson has made acquisitions recently to expand its European drug distribution business and U.S. oncology services. McKesson's planned takeover of retail pharmacy Rexall Health for $2.2 billion would broaden its reach in Canada.

Meanwhile, McKesson saw few opportunities for information technology deals at the right price, John Hammergren, McKesson's president and CEO, said in an interview. The announced joint venture will benefit from greater scale, he said.

Earlier this month The Wall Street Journal reported that McKesson was considering a separation of its information-technology unit as the company grapples with pricing pressure in its core drug-distribution business.

McKesson said the businesses in the new venture generated combined revenue of $3.4 billion for the year ended March 31. The venture aims to generate more than $150 million in annual cost savings by the second year after closing, which is expected in the first half of next year.

McKesson CEO Hammergren will be chairman of the venture, while Change Healthcare CEO Neil de Crescenzo will lead the new firm. Mr. Hammergren said the venture will unite complementary capabilities from both companies to help customers address complex financial and clinical challenges.

--Melanie Evans contributed to this article.

Write to Tess Stynes at tess.stynes@wsj.com

(END) Dow Jones Newswires

June 29, 2016 02:49 ET (06:49 GMT)

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