The UnitedHealth Group acquisition of Catamaran will partially side-step Canada by investing up to U.S.$5B of the purchase price in a Catamaran LLC subsidiary, with that cash being indirectly distributed to the Catamaran shareholders as share redemption proceeds

It is proposed that Catamaran, a Canadian public company with a U.S.-focused pharmacy claims management business, will be acquired under a Yukon Plan of Arrangement by a B.C. ULC subsidiary of UnitedHealth Group, a public Minnesota corporation.  Each Catamaran shareholder will receive $61.50 per common share in cash.  However, in order to accomplish a partial "de-sandwiching" of the resulting structure, the cash proceeds will be bifurcated.  Approximately $18 to $24 per share (or $3.7B to $5B in total) will be received as a result of a (presumably non-Canadian) subsidiary of UnitedHealth Group lending to an indirect LLC subsidiary of Catamaran, with those funds being indirectly distributed to Catamaran which, in turn, will distribute those funds to its shareholders as redemption proceeds for preferred shares which were issued to them under a s. 86 reorg.

The balance of the cash will be paid by the (B.C. ULC) purchaser for the "Class X" common shares of Catamaran (also issued under the s. 86 reorg.)  Catamaran apparently is a "10(f) corp" for purposes of the foreign affiliate dumping rules.

For U.S. purposes, this bifurcated transaction likely will be viewed as an integrated transaction, i.e.., the preferred share redemption proceeds will be treated as part of the sales proceeds, rather than as a dividend (to the extent of current or accumulated E&P) – and the Plan of Arrangement requires the parties to follow this treatment for U.S. purposes.

Neal Armstrong.  Summary of Catamaran Proxy Statement under Mergers & Acquisitions – Cross-Border Acquisitions – Inbound – Canadian Buyco.