Equity method investments

9 Months Ended

May 31, 2024

Equity Method Investments and Joint Ventures [Abstract]

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


	May 31, 2024			August 31, 2023
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
Cencora	$	1,896	12%	$	2,534	16%
Others	1,065		8% - 50%	963		8% - 50%
Total	$	2,961		$	3,497

Cencora investment

As of May 31, 2024 and August 31, 2023, the Company owned 24.4 million and 31.8 million shares of Cencora, Inc. (“Cencora”) common stock, respectively, representing approximately 12.4% and 15.9% of its outstanding common stock based on the share count publicly reported by Cencora in its most recent filings with the SEC.

During the three months ended May 31, 2024 and May 31, 2023, the Company sold shares of Cencora common stock for total consideration of approximately $400 million and $50 million, respectively. These transactions resulted in the Company recording pre-tax gains, inclusive of equity method basis difference adjustments, of $88 million and $25 million, respectively, in Other income, net within the Consolidated Condensed Statements of Earnings, including $10 million and $2 million of losses, respectively, reclassified from within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets.

During the nine months ended May 31, 2024 and May 31, 2023, the Company sold shares of Cencora common stock for total consideration of approximately $1.6 billion and $3.1 billion, respectively. These transactions resulted in the Company recording pre-tax gains, inclusive of equity method basis difference adjustments, of $847 million and $1.5 billion, respectively, in Other income, net within the Consolidated Condensed Statements of Earnings, including $39 million and $152 million of losses, respectively, reclassified from within Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets.

As of May 31, 2024 and August 31, 2023, the Company has pledged 20.0 million and 17.3 million shares of Cencora common stock, respectively, as collateral upon entering into variable prepaid forward (“VPF”) transactions. See Note 8. Financial instruments for further information.

The Company accounts for its equity investment in Cencora 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 Cencora, the Company accounts for this equity method investment on a financial reporting lag of two months. Equity earnings from Cencora are reported as a separate line item in the Consolidated Condensed Statements of Earnings.

The Level 1 fair market value of the Company’s equity investment in Cencora common stock at May 31, 2024 and August 31, 2023 was $5.5 billion and $5.6 billion, respectively. As of May 31, 2024 the carrying value of the Company’s investment in Cencora exceeded its proportionate share of the net assets of Cencora by $1.8 billion. This premium of $1.8 billion was recognized as part of the carrying value in the Company’s equity investment in Cencora. The difference is primarily related to goodwill and the fair value of Cencora intangible assets.

Other investments

At May 31, 2024, 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. 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. In the three months ended May 31, 2023, the Company also 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.