Premier Inc. carving off non-healthcare group purchasing business in $800M cash deal

Premier Inc. announced Wednesday a definitive agreement to offload its non-healthcare group purchasing operations for about $800 million cash, a deal that aims to satisfy stockholders and allow the company to focus its attention on growth in its core healthcare business.

The deal with fellow group purchasing organization (GPO) OMNIA Partners is expected to close in early August subject to regulatory approval and other conditions.

Charlotte, North Carolina-based Premier said the proceeds will help support its core healthcare activities, through which it handles medical supply negotiations and purchases for more than 4,400 member hospitals and health systems.

The deal would also make good on the company’s promise to shareholders last month to explore strategic alternatives after “evolving market dynamics, coupled with an uncertain and challenging operating environment,” gutted nine-month net revenues by nearly 9% from the previous year.

“This transaction unlocks substantial value for Premier’s stockholders and is an important step in our ongoing review of strategic alternatives,” Michael J. Alkire, Premier president and CEO, said in the announcement.

The non-healthcare GPO operations involved in the deal include members from the educational, hospitality and recreation industries, for which OMNIA will become the primary GPO. OMNIA would also begin providing support to Premier’s channel partners that service the non-healthcare members.

Non-healthcare members will continue to have access to the Premier GPO portfolio—a boon for both companies.

“Following the transaction, Premier and OMNIA have aligned growth incentives and will economically benefit from non-healthcare GPO members’ continued purchasing through Premier’s supplier contracts,” they wrote in the announcement.

Premier said the sale would have “no impact” on its core healthcare business and that it is maintaining all existing healthcare contracts, services, solutions and programs. However, the company did say that the divesture gives it more bandwidth to focus on growing its healthcare operations.

“We are excited to enhance our focus on our member services and core healthcare businesses as we continue executing our strategies to drive sustainable, long-term growth,” Alkire said. “At the same time, we are evaluating the highest return opportunities for deploying the proceeds from this transaction, including the potential to accelerate the return of capital to stockholders.”

Additional terms and information included in the definitive agreement will be disclosed in an upcoming Form 8-K filing, Premier said.

In third-quarter earnings released in early May, Premier leadership trimmed its full-year 2023 projected earnings and attributed some of the company’s financial difficulties to direct sourcing operations that continued to be hit by “excess market supply and member inventory levels which contribute to lower demand and pricing.” The company also pointed to “softer demand and delayed decision-making by members … mainly due to the current macro-economic environment.”

Premier is slated to report its full-year earnings in August. Due to the timing of the deal, Premier said it does not expect the potential sale to have an impact on its 2023 financial results.