Acquisitions
We have completed several acquisitions since July 1, 2010, including the acquisitions described below. The pro forma results of operations and the results of operations for acquisitions since the acquisition date have not been separately disclosed because the effects were not significant enough compared to the consolidated financial statements, individually or in the aggregate.
AssuraMed
On March 18, 2013, we completed the acquisition of AssuraMed, Inc. ("AssuraMed") for $2.07 billion, net of cash acquired, in an all-cash transaction. We funded the acquisition through the issuance of $1.3 billion in fixed rate notes, as discussed in Note 6, and cash on hand. The acquisition of AssuraMed, a provider of medical supplies to homecare providers and patients in the home, expands our ability to serve this patient base. Transaction costs associated with the purchase of AssuraMed were $20 million and are included in acquisition-related costs in the consolidated statements of earnings.
The assessment of fair value is preliminary and is based on information that was available at the time the consolidated financial statements were prepared. The valuation of identifiable intangible assets utilizes significant unobservable inputs and thus represents a Level 3 nonrecurring fair value measurement, as further defined in Note 10. The estimated fair value of the identifiable intangible assets was determined using an income-based approach, which includes market participant expectations of the cash flows that an asset could generate over its remaining useful life, discounted back to present value using an appropriate rate of return. The discount rate used to arrive at the present value of the identifiable intangible assets was 9.5 percent to reflect the internal rate of return and uncertainty in the cash flow projections.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date for AssuraMed:
|
| | | | | |
(in millions) | Amount | | Weighted-Average Useful Lives of Identifiable Intangible Assets |
Identifiable intangible assets: | | | |
Customer relationships | $ | 460 |
| | 9 |
Trade names | 160 |
| | 11 |
Other | 7 |
| | 3 |
Total identifiable intangible assets acquired | 627 |
| | 9 |
| | | |
Cash and equivalents | 25 |
| | |
Trade receivables | 117 |
| | |
Inventories | 70 |
| | |
Prepaid expenses and other | 88 |
| | |
Property and equipment | 40 |
| | |
Accounts payable | (71 | ) | | |
Other accrued liabilities | (23 | ) | | |
Deferred income taxes and other liabilities | (180 | ) | | |
Total identifiable net assets acquired | 693 |
| | |
Goodwill | 1,402 |
| | |
Total net assets acquired | $ | 2,095 |
| | |
Kinray
On December 21, 2010, we completed the acquisition of privately-held Kinray, Inc. for $1.3 billion in an all-cash transaction. The valuation of the acquired assets and liabilities resulted in goodwill of $984 million and identifiable intangible assets of $133 million.
Cardinal Health China
On November 29, 2010, we completed the acquisition of Cardinal Health China for $458 million, including the assumption of $57 million in debt. The valuation of the acquired assets and liabilities resulted in goodwill of $240 million and identifiable intangible assets of $56 million.
P4 Healthcare
On July 15, 2010, we completed the acquisition of privately-held Healthcare Solutions Holding, LLC (“P4 Healthcare”) for $506 million in cash and certain contingent consideration. The valuation of the acquired assets and liabilities resulted in goodwill of $368 million and identifiable intangible assets of $226 million.
In accordance with the acquisition agreement, as amended, the former owners of P4 Healthcare had the right to receive certain contingent payments based on targeted earnings before interest, taxes, depreciation and amortization ("EBITDA"). The contingent consideration was limited to $100 million. In fiscal 2011, we paid $10 million in accordance with the agreement. In fiscal 2012, we recorded a $71 million decrease in the fair value of the obligation and in fiscal 2013, we terminated and settled the remaining contingent consideration obligation for $4 million. See Note 10 for an explanation of the fair value measurement for the contingent consideration obligation.
