Item 1.01 Entry Into a Material Definitive Agreement
On February 4, 2020 Premier, Inc. ("Premier") announced that Premier, through
two newly formed consolidated subsidiaries (the "Buyers"), entered into an asset
purchase agreement (the "Purchase Agreement") dated as of February 3, 2020 by
and among the Buyers, Acurity, Inc. ("Acurity"), Nexera, Inc. ("Nexera, and
together with Acurity, the "Sellers"), and the guarantors named in the Purchase
Agreement, including Premier Healthcare Alliance, L.P. ("Premier LP") and GNYHA
Management Corporation, pursuant to which the Buyers have agreed to acquire
substantially all of the assets and assume certain liabilities of the Sellers.
The Sellers are each indirect wholly-owned subsidiaries of Greater New York
Hospital Association, Inc. ("GNYHA").
Acurity, a regional group purchasing organization, has been a customer and
strategic partner of Premier for more than 24 years. Nexera, a hospital
financial improvement consulting firm, partners with healthcare organizations to
improve hospital and health system performance, with a significant focus on
supply chain enhancement and transformation.
Pursuant to the terms of the Purchase Agreement, Premier will pay an aggregate
amount of approximately $291.5 million, of which approximately $46.5 million
represents the agreed upon net present value of the amounts that would have been
payable to GNYHA Purchasing Alliance, LLC ("GNYHA Purchasing") pursuant to that
certain Tax Receivable Agreement (the "TRA"), made as of September 25, 2013, as
amended to date, by and among Premier and the limited partners of Premier LP,
had GNYHA Purchasing remained a limited partner of Premier LP throughout the
term of the TRA ("Discounted TRA Payments"). The amount payable at closing is
approximately $166.1 million, which includes Discounted TRA Payments of
approximately $41.1 million. An additional $120.0 million will be paid to
Sellers in four equal annual installments of $30.0 million on or about June 30,
2021, 2022, 2023 and 2024. An additional approximately $5.4 million in
Discounted TRA Payments is expected to be paid to GNYHA Purchasing during
Premier's third fiscal quarter of 2021. Under the Purchase Agreement,
$10.0 million of the purchase price will be placed into an escrow account to
cover certain liabilities of GNYHA Purchasing arising under the Amended and
Restated Limited Partnership Agreement of Premier LP, dated as of September 25,
2013, as amended to date, prior to November 2, 2020. GNYHA Purchasing will
unilaterally terminate its participation in the TRA at the closing of the
transaction and will cease to be a limited partner of Premier LP on November 2,
2020. Premier expects to fund the transaction with borrowings under its
revolving credit facility.
In addition to the aggregate amount of approximately $291.5 million, the
Purchase Agreement provides for a graduated contingent payment ("Contingent
Payment") of up to $30.0 million based upon Premier's achievement of a range of
member renewals on terms to be agreed to by Premier and GNYHA based on
prevailing market conditions in December 2023.
As part of the transaction, Premier's Board of Directors (the "Board"), the
Conflict Advisory Committee of the Board (acting through only its independent
director members) (the "CAC") and the Member Agreement Review Committee of the
Board (acting through only its independent director members) (the "MARC"), each
received a fairness opinion from their respective financial advisors stating
that the transaction was fair, from a financial point of view, to Premier. In
addition, the independent directors on each of the CAC and MARC reviewed and
determined that the transaction had a "fair process" and "fair price",
respectively.
The Purchase Agreement contains customary representations, warranties and
covenants. Claims related to the Sellers' general representations and warranties
will survive for 12 months. Claims related to any intentional misrepresentation
or fraud by the Sellers and representations and warranties regarding taxes
("Excluded Matters") will survive until the date the respective applicable
statute of limitations for such items expires. Claims related to certain
additional fundamental representations and warranties, such as due organization
and authority for the transaction, will survive indefinitely. To limit its risks
with respect to the representation and warranties of the Sellers, the Buyers
have also obtained a representations and warranty insurance policy (the "RWI
Policy") with a policy retention (or deductible) of $2.4 million (the
"Retention") and an aggregate coverage limit of $32.0 million. The RWI Policy
provides coverage for claims related to breaches of (i) general representations
and warranties for three (3) years and (ii) fundamental and tax representations
and warranties for six (6) years.
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The Sellers' indemnification obligation generally excludes aggregated claims
that do not exceed $1.2 million (the "Deductible"), and thereafter, the Sellers
are generally liable only for damages in excess of the Deductible (up to the
below limitations and caps). Other than with respect to Excluded Matters and
certain additional fundamental representations and warranties and certain other
excluded liabilities, the Sellers shall be liable for indemnification in amounts
above the Deductible but below the Retention, and the Buyers' sole recourse in
respect of such damages in excess of the Retention shall be to make and pursue
claims under the RWI Policy. With respect to damages arising out of any
misrepresentation, breach or inaccuracy of any representation or warranty
regarding employee benefits, health care regulatory compliance, and/or HIPAA and
privacy laws, the maximum indemnification obligation is $37.5 million. With
respect to damages arising out of any intentional misrepresentation or fraud by
the Sellers, misrepresentation, breach or inaccuracy of any representation or
warranty made in the fundamental representations or regarding tax matters, the
maximum indemnification obligation shall not exceed an amount equal to the sum
of $245.0 million plus any Contingent Payment made.
The Sellers and their affiliates are subject to post-closing non-compete
covenants generally with respect to the provision of group purchasing services,
supply chain management services and supply chain consultative services to
providers, systems and other persons for a seven-year period post-closing. The
Sellers and their affiliates have also agreed, for a period of seven years, not
to influence or attempt to influence any person who was a contracting party with
the Sellers or their affiliates immediately prior to closing and who becomes a
contracting party with Buyer or its affiliates on the closing to terminate or
adversely amend any existing written or oral agreement with a Buyer or its
affiliates. In addition, the Sellers and their affiliates are subject to
non-solicitation provisions with respect to employees, customers, vendors or
suppliers, and business relationships for a seven-year period after closing,
subject to customary carveouts.
Certain current executive officers of the Sellers and their affiliates executed
consulting agreements with Premier that become effective only upon the closing
of the acquisition. Premier currently intends to maintain the Sellers'
operations headquartered in New York, New York. Premier expects to integrate the
acquired assets into Premier's supply chain services segment.
The transaction does not require the approval of Premier's stockholders and is
not conditioned on receipt of financing by the Buyers or Premier. The
transaction is anticipated to close on or about February 28, 2020, subject to
the satisfaction of certain customary closing conditions for transactions of
this type, including approval under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, delivery of conveyance documents, the execution of a
transition services agreement, delivery of executed non-competition and
non-solicitation agreements with certain officers of the Sellers and their
affiliates, accuracy of representations and warranties and performance of
required covenants and agreements, and the absence of any events occurring after
the date of the agreement that would have or be reasonably expected to have a
material adverse effect on certain of the acquired assets.
Generally, the Purchase Agreement may be terminated by the Buyers or Sellers if
the closing does not occur by March 31, 2020, for other customary reasons
related to a material breach of representations, warranties, covenants or other
agreements, or in the event of a governmental order prohibiting the transaction.
The foregoing summary of the Purchase Agreement and the transaction does not
purport to be a complete description and is subject to, and qualified in its
entirety by, the full text of the Purchase Agreement, a copy of which is
attached as Exhibit 2.1 hereto.
Item 7.01 Regulation FD
On February 4, 2020, Premier issued a press release announcing its entry into
the Purchase Agreement and discussing other related matters. A copy of the press
release is furnished herewith as Exhibit 99.1 hereto and is not and shall not be
deemed (i) "filed" as part of this Form 8-K and (ii) incorporated into any other
document filed or furnished by Premier with the Securities and Exchange
Commission ("SEC")
Forward-Looking Statements
Statements made under Item 1.01 of this Form 8-K, or furnished with this Form
8-K under Item 7.01 (including the press release referred to under Item 7.01 and
furnished herewith as Exhibit 99.1), that are not statements of historical or
current facts, such as those related to the expected closing date, ultimate
consideration paid to the Sellers or GNYHA, future operations and integration
matters described herein, and the statements in Exhibit 99.1 furnished herewith
under the heading "Transaction Delivers Compelling Benefits", including
Premier's ability to scale and expand Nexera's products, services and geographic
reach, ability to retain significant revenues,
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the amount of the anticipated negative impact on Adjusted EBITDA, and ability to
realize the expected financial contributions and synergies of the transaction
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements may involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of Premier to be materially different from
historical results or from any future results or projections expressed or
implied by such forward-looking statements. Accordingly, readers should not
place undue reliance on any forward looking statements. In addition to
statements that explicitly describe such risks and uncertainties, readers are
urged to consider statements in the conditional or future tenses or that include
terms such as "believes," "belief," "expects," "estimates," "intends,"
"anticipates" or "plans" to be uncertain and forward-looking. Forward-looking
statements may include comments as to Premier's beliefs and expectations as to
future financial performance, events and trends affecting its business and are
necessarily subject to uncertainties, many of which are outside Premier's
control. More information on potential factors that could affect Premier's
financial results is included from time to time in the "Forward Looking
Statements," "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of Premier's periodic
and current filings with the SEC and available on Premier's website
at http://investors.premierinc.com. You should carefully read these reports.
Forward looking statements speak only as of the date they are made. Premier
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
that occur after that date.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
2.1 Asset Purchase Agreement, dated as of February 3, 2020, by and among
Prince A Purchaser, Inc., Prince N Purchaser, Inc., Acurity, Inc.,
Nexera, Inc., and the guarantors named therein, including Premier
Healthcare Alliance, L.P. and GNYHA Management Corporation.
99.1 Press Release of Premier, Inc., dated February 4, 2020 (furnished
herewith)
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded
within the Inline XBRL document)
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