Equity method investments

3 Months Ended

Nov. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Equity method investments were as follows (in millions, except percentages):


	November 30, 2022			August 31, 2022
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	2,877	20%	$	3,916	25%
Others	1,548		4% - 50%	1,579		8% - 50%
Total	$	4,426		$	5,495

AmerisourceBergen investment

As of November 30, 2022 and August 31, 2022, the Company owned approximately 19.6% and 25.4%, respectively, of AmerisourceBergen common stock based on the share count publicly reported by AmerisourceBergen in its filings with the SEC.

On November 10, 2022, the Company sold 13.2 million shares of AmerisourceBergen common stock through a registered public offering and a concurrent share repurchase by AmerisourceBergen for total consideration of approximately $2.0 billion, decreasing the Company's ownership of AmerisourceBergen’s common stock from approximately 52.9 million shares, held at August 31, 2022, to approximately 39.6 million shares held as of November 30, 2022. The transaction resulted in the Company recording a pre-tax gain of $969 million in Other income, net in the Consolidated Condensed Statements of Earnings, including a $110 million loss reclassified from within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets.

On December 13, 2022, the Company sold 6.0 million shares of AmerisourceBergen common stock pursuant to Rule 144 and a concurrent share repurchase by AmerisourceBergen, for total consideration of approximately $984 million, decreasing the Company's ownership of AmerisourceBergen’s common stock from approximately 39.6 million shares, held at November 30, 2022, to approximately 33.7 million shares held as of January 5, 2023 reflecting approximately 16.7% of AmerisourceBergen outstanding common stock.

The Company accounts for its equity investment in AmerisourceBergen using the equity method of accounting, with the net earnings attributable to the Company’s investment being classified within the operating income of its U.S. Retail Pharmacy 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 from AmerisourceBergen are reported as a separate line in the Consolidated Condensed Statements of Earnings. During the three months ended November 30, 2022 and 2021, the Company recognized equity earnings in AmerisourceBergen of $53 million and $100 million, respectively.

The Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at November 30, 2022 and August 31, 2022 was $6.8 billion and $7.7 billion, respectively. As of November 30, 2022 the carrying value of the Company’s investment in AmerisourceBergen exceeded its proportionate share of the net assets of AmerisourceBergen by $2.9 billion. This premium of $2.9 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.

Other investments

The Company’s other equity method investments primarily include its U.S. investments in Option Care Health, through its subsidiary HC Group Holdings I, LLC (“HC Group Holdings”), and BrightSpring Health Services, and the Company’s investments in China in Sinopharm Medicine Holding Guoda Drugstores Co., Ltd, Guangzhou Pharmaceuticals Corporation, and Nanjing Pharmaceutical Company Limited. On December 15, 2022, the Company sold its ownership interest in Guangzhou Pharmaceuticals Corporation for total consideration of approximately $150 million.

The Company reported $7 million of post-tax equity earnings and $7 million of post-tax equity losses from other equity method investments for the three months ended November 30, 2022 and 2021, respectively.

During the three months ended November 30, 2021, the Company acquired majority equity interests in VillageMD and Shields, both formerly accounted for as equity method investments. The Company accounted for these acquisitions as business combinations resulting in the remeasurement of its previously held minority equity interests and convertible debt securities at fair value resulting in pre-tax gains of $2.2 billion and $402 million for VillageMD and Shields, respectively, recognized in Other income, net in the Consolidated Condensed Statements of Earnings. As a result of these transactions, the Company consolidated VillageMD and Shields within the U.S. Healthcare segment in its financial statements.