Regulatory documents show CD&R and McKesson would owe $292 million if they walk away, double the fee Option Care would pay. The buyers have lined up $2.9 billion of equity and $3.15 billion of debt.
The contract behind the take-private of Option Care Health puts a precise value on the cost of walking away, and the burden falls more heavily on the buyers.
A filing by the home-infusion company with the Securities and Exchange Commission sets out the terms of its agreement to be acquired by Clayton, Dubilier & Rice and McKesson. If Option Care accepts a superior proposal or its board changes its recommendation, it would owe a termination fee of $145,963,976. If the buyers breach the agreement or fail to close, they would owe a reverse termination fee of $291,927,951. That buyer-side fee is approximately twice the company’s.
The parent fee is guaranteed severally by CD&R Fund XII and McKesson, subject to caps. Enforcement expenses are capped at $7.5 million for each side.
The financing stack
The filing details how the deal is funded. CD&R Fund XII and McKesson have provided equity commitment letters totaling $2,873,295,853. Lenders have committed up to $3.15 billion of loans, which include repayment of existing company debt, plus up to $500 million of revolving credit.
The acquisition vehicle is Onyx Bidco, with Onyx Merger Sub as the merging entity. A covenant requires CD&R's vehicles to hold a larger voting and economic share of the parent company than McKesson. That arrangement keeps the buyout firm in control at closing even though McKesson is putting in a large share of the equity, roughly $1.4 billion.
The structure is unusual. A strategic buyer, the drug distributor McKesson, is partnering with a private equity firm, and the agreement contemplates McKesson later buying out CD&R's stake under a framework whose terms have not been made public.
The market's read
Option Care shares jumped 32.65% to $31.00 on Tuesday, the day the deal was announced. That leaves a spread of about 3.4% to the $32.05 per-share deal price. A narrow spread like that suggests investors see a high probability of closing, though it also reflects the time value of money until the deal is done. McKesson shares rose 0.68% to $921.67.
What to watch
The proxy statement will be the next major document, and it should reveal the outside date, the lenders behind the debt commitment and more detail on the McKesson buyout framework. Option Care reports third-quarter results on .