Equity method investments

9 Months Ended

May 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

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


	May 31, 2023			August 31, 2022
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	2,598	17%	$	3,916	25%
Others	928		8% - 50%	1,579		8% - 50%
Total	$	3,527		$	5,495

AmerisourceBergen investment

As of May 31, 2023 and August 31, 2022, the Company owned 33.4 million and 52.9 million shares of AmerisourceBergen Corporation (“AmerisourceBergen”) common stock, respectively, representing approximately 16.5% and 25.4% of its outstanding common stock based on the share count publicly reported by AmerisourceBergen in its filings with the SEC.

On May 11, 2022, November 10, 2022, December 13, 2022, and May 11, 2023, the Company sold 6.0 million, 13.2 million, 6.0 million and 0.3 million shares of AmerisourceBergen common stock for total consideration of approximately $900 million, $2.0 billion, $984 million and $50 million, respectively. These transactions resulted in the Company recording pre-tax gains of $424 million, $969 million, $492 million and $25 million, respectively, in Other income, net in the Consolidated Condensed Statements of Earnings, including $25 million, $110 million, $40 million and $2 million, respectively, of losses reclassified from within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets.

On June 15, 2023, the Company sold an additional 0.3 million shares of AmerisourceBergen common stock for total consideration of approximately $50 million.

On May 11, 2023 and June 15, 2023, the Company pledged 4.6 million and 2.2 million shares of AmerisourceBergen common stock, respectively, as collateral upon entering into variable prepaid forward transactions. See Note 8. Financial instruments for further information.

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.

The Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at May 31, 2023 and August 31, 2022 was $5.7 billion and $7.7 billion, respectively. As of May 31, 2023 the carrying value of the Company’s investment in AmerisourceBergen exceeded its proportionate share of the net assets of AmerisourceBergen by $2.6 billion. This premium of $2.6 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. investment in BrightSpring Health Services, and the Company’s investments in China in Sinopharm Medicine Holding Guoda Drugstores Co., Ltd 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.

On March 3, 2023, the Company sold approximately 15.5 million shares of Option Care Health common stock for total consideration of approximately $469 million, decreasing the Company's ownership interest in Option Care Health from approximately 14.4 percent to 6.0 percent. The transaction resulted in the Company recording a pre-tax gain of $154 million in Other income, net in the Consolidated Condensed Statements of Earnings. As of May 31, 2023, the Company no longer exercised significant influence over the operating and financial policies of Option Care Health and reclassified its investment from an equity method investment to an investment in equity securities at fair value. In the three months ended May 31, 2023, the Company recognized a pre-tax gain of $76 million included in Other income, net within the Consolidated Condensed Statements of Earnings, related to the change in classification of its previously held equity method investment in Option Care Health to an investment in equity security held at fair value, and the related fair value adjustments.

On June 8, 2023, the Company sold the remaining 10.8 million shares of Option Care Health for total consideration of approximately $330 million.

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. During the three months ended February 28, 2022, the Company recognized an other-than-temporary impairment of $124 million related to an equity method investment in China. The impairment was derived using Level 3 inputs, including financial projections and market multiples of comparable companies.