McKesson Sells 13% Stake in Surgical Unit to Apollo for $1.25B

What happened

McKesson announced the sale of a 13% minority stake in its Medical-Surgical Solutions (MMS) division to funds managed by Apollo. Apollo is investing $1.25 billion in convertible preferred equity, which values the MMS unit at roughly $13 billion. McKesson will retain operating control and majority ownership of MMS and will continue to consolidate the unit's financial results. The transaction is subject to regulatory approvals and customary closing conditions. McKesson first announced its intent to separate MMS through an initial public offering in May 2025, with the IPO expected in the second half of calendar 2027.

Why it matters

This deal represents a significant milestone in McKesson's strategic shift to focus on higher-margin, higher-growth areas such as cancer drugs and specialty medications. By bringing in Apollo as a financial and strategic partner, McKesson aims to position MMS for success as a standalone publicly traded company while maintaining financial flexibility. Apollo's experience in supporting complex carve-outs and public market transactions is expected to help smooth the transition. For investors, the transaction provides a concrete valuation benchmark for MMS and demonstrates progress toward unlocking shareholder value through the separation.

Bigger picture

McKesson's decision to separate MMS comes after sluggish growth in the division since 2020, driven by lower volumes, supply chain disruptions, and a post-pandemic environment. MMS represented only 3.2% of McKesson's total corporate revenue at the time of the initial separation announcement. The company has a track record of portfolio actions, including its 2020 exit from Change Healthcare, which streamlined operations and improved returns on invested capital. Apollo, a global alternative asset manager with approximately $938 billion in assets under management as of December 2025, sees MMS as well-positioned for continued growth due to its strong market position and key role in healthcare supply chains outside hospital settings.

What to watch

Investors should monitor the timing and execution of the MMS IPO, currently targeted for the second half of 2027, as well as regulatory approvals for the Apollo transaction. MMS financial performance will be important, particularly revenue growth and operating profit trends in physician office settings and specialty pharmaceuticals. Any updates on transition service agreements and separation milestones will provide insight into the carve-out's progress. Additionally, how Apollo's involvement influences MMS's strategic positioning and capital structure ahead of the public listing will be worth following.

This article was generated by Quantli AI using publicly available news sources.