- Group purchasing organization Premier said Monday its board is evaluating strategic alternatives for the company, including a potential sale of part or all of the business. Shares of Premier rose 4.4% in Tuesday morning trading on the Nasdaq.
- The board and an independent special committee it established are working with financial and legal advisers as they consider a broad range of possible options that also includes recapitalization or other partnership opportunities, Premier said in a statement.
- SVB Securities analyst Stephanie Davis, in a research note after Premier’s announcement, said separating the company’s performance services and supply chain services businesses in a sale process could bring “meaningful upside opportunity” to shares.
Group purchasing organizations, which negotiate price savings on drugs, medical devices and other supplies and services for healthcare providers such as hospitals and physician groups, are facing the same economic pressures that have battered their customers.
Premier, which has a member network of more than 4,400 hospitals and health systems, last week reported a 7% decline in net revenue in the company’s fiscal third quarter and lowered revenue forecasts for its business units for the remainder of the year.
“Evolving market dynamics, coupled with an uncertain and challenging operating environment, compel us to take further action to adapt and help ensure Premier is best positioned for future success,” CEO Michael Alkire said.
The Charlotte, North Carolina-based GPO cited excess market supply and member inventory levels, as well as softer demand and delayed decision-making by members for some of its services due to an uncertain economic outlook.
Davis noted that Premier Chair Terry Shaw highlighted the company’s customer relationships, strong cash generation and flexible balance sheet as factors that give the organization a broad range of options to review.
“We believe the greatest value unlock is likely through a break-up and sale of PINC’s two segments, which could yield up to a $7B enterprise value vs. PINC’s current [enterprise value] of $3.3B,” the analyst wrote.
Premier’s lack of a stock repurchase authorization over the past year, which is unusual given the company’s history of buybacks, suggests the strategic alternatives process may have been underway for up to a year, Davis said.