October 3, 2018 / 10:32 PM / 2 months ago

McKesson's Change Healthcare hires IPO underwriters -sources

Oct 3 (Reuters) - Change Healthcare LLC, a healthcare technology company majority-owned by U.S. drug wholesaler McKesson Corp, has hired underwriters for an initial public offering that could value it at as much as $12 billion, including debt, people familiar with the matter said on Wednesday.

The move comes after McKesson Chief Executive John Hammergren said in January that he intended to take Change Healthcare public.

Hammergren added that he expected this to be a "short-term" decision, but declined to say whether it would happen in 2018 or 2019. Tapping underwriters shows that McKesson is gearing up for the IPO, which the sources said is expected to take place in the first half of 2019.

Change Healthcare has hired investment banks Goldman Sachs Group Inc, Barclays Plc and JPMorgan Chase & Co to lead the IPO, the sources said.

McKesson, Change Healthcare and JPMorgan did not respond to requests for comment, while Goldman Sachs and Barclays declined to comment.

Change Healthcare provides software and analytics used by hospitals, physicians, pharmacies, healthcare providers and insurers. It generated revenue of $856 million in the three months ended June 30, according to a McKesson regulatory filing.

Change Healthcare was formed in March 2017 through a merger of McKesson's technology solutions business with Change Healthcare Holdings Inc, a company owned by private equity firms Blackstone Group LP and Hellman & Friedman LLC. McKesson got a 70 percent stake in the combined company, while Blackstone and Hellman & Friedman own the remainder.

McKesson valued its equity stake in Change Healthcare at $3.67 billion as of the end of June, according to a regulatory filing. Change also took on $6.1 billion in debt last year as part of the deal that created it.

Some of the debt was used to fund a $1.25 billion dividend to McKesson and a $1.75 billion dividend to Blackstone and Hellman & Friedman.

A Change Healthcare IPO comes amid a wave of deal activity in the sector, as increased healthcare spending, higher patient volumes and regulatory complexity drive information technology companies serving the sector to seek new offerings and gain more scale.

Healthcare technology company Athenahealth Inc is exploring a sale after coming under pressure from activist hedge fund Elliott Management Corp. Hospital operator Tenet Healthcare Corp has said it is exploring strategic alternatives for its healthcare technology unit, Conifer. (Reporting by Carl O'Donnell in New York, additional reporting by Joshua Franklin in New York; editing by Bill Berkrot)

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