Redeemable Noncontrolling Interests and Noncontrolling Interests

9 Months Ended

Dec. 31, 2021

Redeemable Noncontrolling Interests and Noncontrolling Interests

Redeemable Noncontrolling Interests

The Company’s redeemable noncontrolling interests primarily related to its consolidated subsidiary, McKesson Europe. Under the December 2014 domination and profit and loss transfer agreement (the “Domination Agreement”), the noncontrolling shareholders of McKesson Europe are entitled to receive an annual recurring compensation amount of €0.83 per share. As a result, the Company recorded a total attribution of net income to the noncontrolling shareholders of McKesson Europe of $8 million during the three months ended June 30, 2021, and $11 million and $32 million during the three and nine months ended December 31, 2020, respectively. All amounts were recorded in “Net income attributable to noncontrolling interests” in the Company’s Condensed Consolidated Statements of Operations and the corresponding liability balance was recorded in “Other accrued liabilities” in the Company’s Condensed Consolidated Balance Sheets.

Under the Domination Agreement, the noncontrolling shareholders of McKesson Europe had a right to put (“Put Right”) their noncontrolling shares at €22.99 per share, increased annually for interest in the amount of five percentage points above a base rate published by the German Bundesbank semi-annually, less any compensation amount or guaranteed dividend already paid by McKesson with respect to the relevant time period (“Put Amount”). Subsequent to the Domination Agreement’s registration, certain noncontrolling shareholders of McKesson Europe initiated appraisal proceedings (“Appraisal Proceedings”) with the Stuttgart Regional Court (the “Court”) to challenge the adequacy of the Put Amount, annual recurring compensation amount, and/or the guaranteed dividend. During the pendency of the Appraisal Proceedings, such amount was paid as specified in the Domination Agreement. On September 19, 2018, the Court ruled that the Put Amount shall be increased by €0.51 resulting in an adjusted Put Amount of €23.50. The annual recurring compensation amount and/or the guaranteed dividend remained unadjusted. Noncontrolling shareholders of McKesson Europe appealed this decision. McKesson Europe Holdings GmbH & Co. KGaA also appealed the decision. On April 12, 2021, the Company received notice that the Stuttgart Court of Appeals ruled that the Put Amount shall remain €22.99, thereby rejecting the lower court’s increase, and the recurring compensation remained at €0.83 per share.

During the nine months ended December 31, 2021 and 2020, the Company paid $1.0 billion and $49 million, respectively, to purchase 34.5 million and 1.8 million shares, respectively, of McKesson Europe through exercises of the Put Right by the noncontrolling shareholders. This decreased the carrying value of the noncontrolling interests by $983 million and $49 million, respectively, for the nine months ended December 31, 2021 and 2020, and the Company recorded the associated effect of the increase in the Company’s ownership interest of $178 million and $3 million, respectively, as an increase to McKesson stockholders’ additional paid-in capital. The Put Right expired on June 15, 2021, at which point the remaining shares owned by the minority shareholders, with a carrying value of $287 million, were transferred from “Redeemable noncontrolling interests” to “Noncontrolling interests” in the Condensed Consolidated Balance Sheet.

The redeemable noncontrolling interest was adjusted each period for the proportion of other comprehensive income, primarily due to changes in foreign currency exchange rates, attributable to the noncontrolling shareholders. Prior to expiration of the Put Right, the balance of the redeemable noncontrolling interests was reported as the greater of its carrying value or its maximum redemption value at each reporting date. At March 31, 2021, the carrying value of $1.3 billion exceeded the maximum redemption value of $1.2 billion and the Company owned approximately 78% of McKesson Europe’s outstanding common shares.

Noncontrolling Interests

Noncontrolling interests represent third-party equity interests in the Company’s consolidated entities primarily related to ClarusONE Sourcing Services LLP and Vantage Oncology Holdings, LLC. As discussed above, after June 15, 2021 noncontrolling interests also represent minority shareholder equity interests in McKesson Europe. At December 31, 2021, the Company owned approximately 95%, of McKesson Europe’s outstanding common shares. The Company’s noncontrolling interest in McKesson Europe will be included in the sale of the E.U. disposal group, as discussed in Financial Note 2, “Held for Sale.” The Company allocated $46 million and $128 million of net income to noncontrolling interests during the three and nine months ended December 31, 2021, respectively, and $41 million and $120 million during the three and nine months ended December 31, 2020, respectively.

Changes in redeemable noncontrolling interests and noncontrolling interests for the three and nine months ended December 31, 2021 were as follows:


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, September 30, 2021	$	484	$	—
Net income attributable to noncontrolling interests	46		—
Other comprehensive loss	(2)		—
Reclassification of recurring compensation to other accrued liabilities	(3)		—
Payments to noncontrolling interests	(38)		—



Balance, December 31, 2021	$	487	$	—


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, March 31, 2021	$	196	$	1,271
Net income attributable to noncontrolling interests	128		8
Other comprehensive income (loss)	(2)		3
Reclassification of recurring compensation to other accrued liabilities	(5)		(8)
Payments to noncontrolling interests	(117)		—
Exercises of Put Right	—		(983)
Reclassification of McKesson Europe redeemable noncontrolling interests	287		(287)
Other	—		(4)
Balance, December 31, 2021	$	487	$	—

Changes in redeemable noncontrolling interests and noncontrolling interests for the three and nine months ended December 31, 2020 were as follows:


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, September 30, 2020	$	200	$	1,265
Net income attributable to noncontrolling interests	41		11
Other comprehensive income	—		25
Reclassification of recurring compensation to other accrued liabilities	—		(11)
Payments to noncontrolling interests	(41)		—

Other	—		2
Balance, December 31, 2020	$	200	$	1,292


(In millions)	Noncontrolling Interests		Redeemable Noncontrolling Interests
Balance, March 31, 2020	$	217	$	1,402
Net income attributable to noncontrolling interests	120		32
Other comprehensive loss	—		(65)
Reclassification of recurring compensation to other accrued liabilities	—		(32)
Payments to noncontrolling interests	(134)		—
Exercises of Put Right	—		(49)
Other	(3)		4
Balance, December 31, 2020	$	200	$	1,292