Acquisitions

6 Months Ended

Feb. 28, 2021

iA acquisition

On December 29, 2020, the Company acquired a majority equity interest in Innovation Associates, Inc. for a cash consideration of $451 million. Innovation Associates, Inc. is a leading-edge provider of software enabled automation solutions for retail, hospital and federal healthcare and mail-order pharmacy markets. The Company accounted for this acquisition as a business combination and consolidates Innovation Associates, Inc. within the United States segment in its financial statements. Considering the contractual terms related to the noncontrolling interest, it is classified as redeemable noncontrolling interest in the Consolidated Condensed Balance Sheets. See Note 19 Supplemental information for more details on redeemable noncontrolling interest. The goodwill arising from this acquisition reflects the expected operational synergies and cost savings to be derived as a result of this acquisition.

As of February 28, 2021, the Company had not completed the analysis to determine the fair value of the consideration paid or to assign fair values to all tangible and intangible assets acquired, and therefore the purchase price allocation has not been completed. The preliminary purchase price allocation will be subject to further refinement and may result in changes. These changes may relate to finalization of the fair value of the purchase consideration and the allocation of purchase consideration to all tangible and intangible assets acquired and identified.

The following table summarizes the consideration for the acquisition and the preliminary amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions):


Purchase Price Allocation:


Total Consideration	$	477
Identifiable assets acquired and liabilities assumed
Tangible assets	$	58
Developed technology and other intangibles	202
Liabilities	(74)
Total identifiable net assets	$	186
Non-controlling interest	$	103
Goodwill	$	394

Pro forma net earnings and sales of the Company, assuming the acquisition had occurred at the beginning of each period presented, would not be materially different from the results reported. The acquisition did not have a material impact on net earnings or sales of the Company for the three and six months ended February 28, 2021 and February 29, 2020.

Pharmaceutical Wholesale business in Germany

On November 1, 2020, the Company and McKesson Corporation closed a transaction to form a combined pharmaceutical wholesale business in Germany, as part of a strategic alliance. The Company owns a 70% controlling equity interest in the combined business which is consolidated by the Company and reported within the International segment in its financial statements. The Company accounted for this acquisition as a business combination involving noncash purchase consideration of $296 million consisting of the issuance of an equity interest in the combined business.

As of February 28, 2021, the Company had not completed the analysis to determine the fair value of the consideration paid or to assign fair values to all tangible and intangible assets acquired, and therefore the purchase price allocation has not been completed. The preliminary purchase price allocation will be subject to further refinement and may result in changes. These changes may relate to finalization of the fair value of the purchase consideration consisting of the issuance of an equity interest in the combined business and the allocation of purchase consideration and the fair value assigned to all tangible and intangible assets acquired and identified.

The following table summarizes the consideration for the acquisition and the preliminary amounts of identified assets acquired and liabilities assumed at the date of the transaction (in millions):


Purchase Price Allocation:
Total Consideration	$	323
Identifiable assets acquired and liabilities assumed
Accounts receivable, cash and other assets	$	583
Inventories	470
Property, plant and equipment	125
Short term debt	(296)
Trade accounts payable, accrued expenses and other liabilities	(374)
Other noncurrent liabilities	(197)
Total identifiable net assets	$	311
Goodwill	$	12

A noncontrolling interest was recognized based on its proportionate interest in the identifiable net assets of the combined business. The difference between the carrying amount of the non-controlling interest and the fair value of the consideration in the business combination is recognized as additional paid in capital. Considering the contractual terms related to the noncontrolling interest, it is classified as redeemable noncontrolling interest in the Consolidated Condensed Balance Sheets. See Note 19 Supplemental information for more details on redeemable noncontrolling interest.

The following table represents supplemental unaudited condensed pro forma consolidated sales for the three and six months ended February 28, 2021 and February 29, 2020, respectively as if the acquisition had occurred at the beginning of each period. The unaudited condensed pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company's results would have been had the acquisition occurred at the beginning of the periods presented or results which may occur in the future.


	Three months ended				Six months ended
(in millions)	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Sales	$	32,779	$	32,787	$	65,261	$	64,172

Actual sales for the three and six months ended February 28, 2021 included in the Consolidated Statement of Earnings are as follows:


(in millions)	Three months ended February 28, 2021		Six months ended February 28, 2021
Sales	$	1,523	$	2,039

Pro forma net earnings of the Company, assuming the acquisition had occurred at the beginning of each period presented, would not be materially different from the results reported.

Other acquisitions

The Company acquired certain prescription files and related pharmacy inventory primarily in the United States for the aggregate purchase price of $28 million and $66 million during the three and six months ended February 28, 2021, respectively and $60 million and $140 million during the three and six months ended February 29, 2020, respectively.