The reorganization would divide the company into two segments, one focused on its supply-chain purchasing and the other, dubbed Premier Healthcare Solutions, focused on consulting. The existing hospital system-owners of Premier would retain voting control of the newly public company—at least for the first few years.
New investors would be issued Class A shares while the hospital system-owners—its members—would be issued Class B shares. The hospitals would retain about 80% control of the company, although the exact percentages were not listed in the prospectuses.
The prospectus did not list the relative voting power of each class. But it did give Class B shareholders the right to sell one-seventh of their shares in the open market each year for the first seven years of the agreement.
In listing the benefits to existing member-owners, the prospectus said they would collectively own a majority of the voting power of the outstanding common stock and have the ability to elect all members of the 12-member board “for so long as they collectively own a majority of the voting power of the outstanding common stock.”
The member-owners will also receive an as yet undisclosed payout in cash from the stock offering. And they would still receive their regular quarterly cash distributions from Premier's taxable income. The agreement said those distributions could be maintained for as long as 15 years after sale of the Class B shares.
The GPO market in the U.S. has rapidly consolidated over the last decade, creating a competitive national market with a handful of players that make up an estimated 85% of the market.
GPOs primarily negotiate discounts on medical and surgical supplies on behalf of hospitals and then are paid what is called an administrative fee of about 1% to 3% by the suppliers.
Many GPOs have expanded their service offerings to include data tools, revenue cycle management or consulting services. And, as hospitals have moved forward with initiatives that aim to cut supply costs and offset declining reimbursement and patient volumes, that has increased pressure on GPOs.
Premier reported $869 million in total net revenue and net income of $375 million in its fiscal 2013, which ended June 30, according to the S-1.
The number of shares to be offered and the price range for the offering have not yet been determined, Premier said in a statement.
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