Equity method investments

9 Months Ended

May 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity method investments as of May 31, 2021 and August 31, 2020, were as follows (in millions, except percentages):


	May 31, 2021			August 31, 2020
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	4,193	28%	$	5,446	28%
Others	2,584		8% - 50%	1,758		8% - 50%
Total	$	6,778		$	7,204

AmerisourceBergen investment

As of May 31, 2021 and August 31, 2020, the Company owned 56,854,867 AmerisourceBergen common shares, representing approximately 27.7% of its outstanding common stock based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q. The Company accounts for its equity investment in AmerisourceBergen using the equity method of accounting, with the net earnings (loss) attributable to the Company’s investment being classified within the operating income of its United States segment. Due to the timing and availability of financial information of AmerisourceBergen, the Company accounts for this equity method investment on a financial reporting lag of two months. Equity earnings (loss) from AmerisourceBergen are reported as a separate line in the Consolidated Condensed Statements of Earnings. During the nine months ended May 31, 2021, the Company recognized equity losses in AmerisourceBergen of $1,196 million, which included a loss of $1,373 million recognized during the three months ended November 30, 2020. These equity losses were primarily due to AmerisourceBergen's recognition of $5.6 billion, net of tax, and charges related to its ongoing opioid litigation in its financial statements for the three months period ended September 30, 2020.

The Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at May 31, 2021 was $6.5 billion. As of May 31, 2021, the carrying value of the Company’s investment in AmerisourceBergen exceeded its proportionate share of the net assets of AmerisourceBergen by $4.2 billion. This premium of $4.2 billion was recognized as part of the carrying value in the Company’s equity investment in AmerisourceBergen. The difference was primarily related to goodwill and the fair value of AmerisourceBergen intangible assets.

On January 6, 2021, the Company entered into a Share Purchase Agreement with AmerisourceBergen pursuant to which AmerisourceBergen agreed to purchase the majority of the Company's Alliance Healthcare business. See Note 2 Discontinued operations for additional information. On June 1, 2021, the Company completed the sale and received $6.275 billion in cash, subject to certain purchase price adjustments, and 2 million shares of AmerisourceBergen common stock. After giving effect to the Transaction, the Company beneficially owns approximately 28.4% of AmerisourceBergen’s outstanding common stock, based on the share count publicly reported by AmerisourceBergen in its most recent Quarterly Report on Form 10-Q. See Note 20 Subsequent events.

Other investments

The Company’s other equity method investments include its investments in the U.S. which include VillageMD, BrightSpring Health Services (previously PharMerica Corporation), Shields Health Solutions and the Company's investment in HC Group Holdings I, LLC (“HC Group Holdings”) which owns equity interest in Option Care Health and the Company's China investments in Sinopharm Medicine Holding Guoda Drugstores Co., Ltd, Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited.

The Company reported $575 million of post-tax equity earnings and $6 million of post-tax equity earnings from other equity method investments for the three months ended May 31, 2021 and May 31, 2020, respectively. The Company reported $604 million of post-tax equity earnings and $5 million of post-tax equity earnings from other equity method investments for the nine months ended May 31, 2021 and May 31, 2020, respectively.

During the three and nine months ended May 31, 2021, the Company recorded a gain of $98 million and $290 million, respectively, in Other income due to partial sale of ownership interest in Option Care Health by the Company's equity method investee HC Group Holdings. During the three months ended May 31, 2021, as a result of these sales, our equity method investee HC Group Holdings lost the ability to control Option Care Health and, therefore, deconsolidated Option Care Health in its financial statements. As a result of this deconsolidation, HC Group Holdings recognized a gain of $1.2 billion and the Company recorded its share of equity earnings in HC Group Holdings of $576 million during the three months ended May 31, 2021, in Post tax earnings from other equity method investments.

During the nine months ended May 31, 2021, the Company made an additional investment of $750 million in VillageMD of which $250 million is recorded as an equity method investment and $500 million is recorded as an investment in convertible debt securities within Other non-current assets.

Summarized financial information

Summarized financial information for the Company’s equity method investments in aggregate is as follows:

Statements of earnings (loss) (in millions)


	Three months ended May 31,				Nine months ended May 31,
	2021		2020		2021		2020
Sales	$	55,890	$	52,772	$	171,417	$	157,382
Gross profit	2,558		2,253		7,647		6,476
Net earnings (loss)	489		912		(3,841)		1,268
Share of earnings (loss) from equity method investments	672		249		(591)		289

The summarized financial information for equity method investments has been included on an aggregated basis for all investments as reported for the three and nine months ended May 31, 2021 and May 31, 2020, respectively.