Premier Looks to Sell Two Subsidiaries as Strategic Review Wraps
The leaders of Premier Inc. plan to sell two of the company’s units—including one they grew in late 2022 via a $178 million acquisition—as part of a plan to refocus on supply chain work and related data and technology services.
Charlotte-based Premier last spring launched a broad review of its strategy and businesses. The conclusion of that work includes putting on the sale block Contigo Health, a direct-to-employer subsidiary that markets third-party administrator and health-benefit program management services, and S2S Global, a direct sourcing venture that markets factory-direct products.
Contigo is on pace to book about $40 million in revenue this fiscal year (Premier runs on a June 30 calendar), in line with last year’s number. But President and CEO Mike Alkire and his team had far higher hopes in the fall of 2022, when they agreed to buy more than 900,000 provider contracts from TRPN Direct Pay Inc. and set out to roll those relationships into an out-of-network wrap product to be paired with its health plan administration services. That journey hit rough waters last year, when Premier wrote down the value of Contigo by more than $54 million because profits were proving more elusive than forecast.
Financials for S2S aren’t public but Craig McKasson, Premier’s chief administrative and financial officer, said his team expects the sales of Contigo and S2S to be a small positive to Premier’s profits in the fiscal year they happen.
“We are excited to move forward with a more focused strategy predicated on automating and streamlining all aspects of the supply chain and leveraging our unique data, technologies and AI capabilities,” Alkire said in a Feb. 6 statement. “We intend to find the right partners for our Contigo and S2S businesses to help take them to new heights. We are confident this is the right path forward to drive profitable growth and sustainable value creation.”
In addition to the planned divestitures of Contigo and S2S Global—McKasson said the leadership team is looking for other entities to buy at least majority stakes in those ventures—Premier’s leaders last year also sold their non-healthcare group purchasing business to Omnia Partners for about $740 million. On Feb. 6, Alkire and McKasson said the review also led Premier’s directors to authorize a plan to buy back $1 billion worth of stock by the middle of next year.
Shares of Premier (Ticker: PINC) rose nearly 3 percent to $21.53 after the company’s quarterly earnings report and strategic review/divestiture news. Over the past six months, however, they are still down more than 20 percent, a drop that has cut the company’s market capitalization to about $2.6 billion.
