(Reuters) — McKesson Corp (MCK.N), one of the largest U.S. drug distributors, has held talks about merging its information technology unit with healthcare technology company Change Healthcare Inc, three people familiar with the matter said.
A combination of McKesson’s IT unit with Change Healthcare would create one of the biggest players in the healthcare information technology sector, potentially worth more than $10 billion, including debt, the people said this week.
McKesson has explored separating its healthcare IT unit, called Technology Solutions, and combining it with other companies in the sector, the people said. There is no certainty that a combination with Change Healthcare, or that any transaction involving Technology Solutions, will occur, the people added.
McKesson and Change Healthcare declined to comment.
For New York-based McKesson, a deal for Technology Solutions would be a continuation of its ongoing strategy of shedding assets that are not core to its pharmaceutical distribution business. Last year, McKesson sold its care management unit to investment firm Comvest Partners for an undisclosed sum.
In the past year, several household name companies, including Hewlett-Packard Co and Xerox Corp (XRX.N), have cleaved off large portions of their businesses in an effort to unlock shareholder value.
In the healthcare sector, drugmaker Baxter International (BAX.N) spun off its rare diseases unit Baxalta, and pharmaceutical giant Pfizer Inc carved out its animal health unit Zoetis Inc (ZTS.N).
In 1999, McKesson entered the healthcare technology space by purchasing a large tech company, HBO & Co, for $14.5 billion.
Shortly after the deal, auditors discovered that HBO & Co had been fraudulently boosting sales, eventually leading to a shareholder lawsuit that cost McKesson nearly $1 billion.
McKesson’s technology solutions business also consists of RelayHealth, a provider of online physician communication services that McKesson purchased for an undisclosed sum in 2006.
It is now seen as being worth around $2 billion, and is widely considered to have significant potential to ramp up future revenues, some of the people said.
Nashville, Tennessee-based Change Healthcare, formerly known as Emdeon, provides revenue cycle management and other information technology tools to hospitals and doctors’ offices.
Change Healthcare is majority owned by private equity firm Blackstone Group LP (BX.N), which took the company private for $3 billion in 2011.
Take your pick!
- Buyouts delivers exclusive news and analysis about private equity deals, fundraising, top-quartile managers and more. Get your FREE trial or subscribe now.
- VC Journal provides exclusive news and analysis about venture capital deals, fundraising, top-quartile investors and more. Get your FREE trial or subscribe now.