Item 1.01. Entry Into A Material Definitive Agreement.
On May 6, 2019, Premier, Inc. (the “Company”) announced that its consolidated subsidiaries, Commcare Pharmacy – FTL, LLC, a Florida limited liability company (“Commcare”), Acro Pharmaceutical Services LLC, a Pennsylvania limited liability company (“Acro” and, together with Commcare, the “Sellers”), NS3 Health, LLC, a Florida limited liability company (the “Equity Holder”), and the Company, for limited purposes, entered into an Asset Purchase and Sale Agreement (the “Asset Purchase Agreement”), dated as of May 6, 2019, with ProCare Pharmacy, L.L.C., a Rhode Island limited liability company (the “Buyer”), an affiliate of CVS Health Corporation, pursuant to which Buyer agreed to purchase from the Sellers prescription files and records and certain other assets (collectively, the “Assets”) used in the Company’s specialty pharmacy business (the “Specialty Pharmacy Business”), for a cash purchase price of $22.5 million, plus an amount equal to the value of pharmaceutical inventory up to $20 million, subject to certain adjustments (the “Transaction”). In addition, the Company plans to discontinue operations of, and wind down and exit from, the Specialty Pharmacy Business, including both Acro and Commcare, in connection with the closing of the Transaction. The proceeds to be received in the Transaction will be used primarily to fund costs associated with the Company’s wind down and exit from the Specialty Pharmacy Business, and for general corporate purposes.
The closing of the Transaction is expected to occur during the Company’s fiscal fourth quarter ending June 30, 2019 and is subject to closing conditions customary for transactions of this type, including but not limited to an absence of material adverse changes.
The Sellers, Equity Holder and Buyer have each made customary representations and warranties in the Asset Purchase Agreement. Additionally, Sellers and Buyer have agreed to various covenants and agreements in the Asset Purchase Agreement, including, among other things, that Sellers have agreed to (i) conduct their business in the ordinary and usual course of business during the period between the execution of the Asset Purchase Agreement and the closing of the Transaction, (ii) send all required notifications of the sale of the Assets to all applicable governmental authorities, (iii) surrender their pharmacy licenses to the applicable governmental authorities, (iii) transition the Assets, and (iv) comply with certainnon-competition andnon-solicitation provisions. In the Asset Purchase Agreement, the Company has also agreed to certain operational and/or indemnification provisions related tonon-competition andnon-solicitation and compliance with other transfer requirements.
The Asset Purchase Agreement also includes mutual indemnification provisions subject to certain limitations, including time limitations, a deductible in respect of certain claims and a cap on recovery in respect of certain claims. The Asset Purchase Agreement also includes an escrow of $1.125 million as the first recourse for any indemnification and other obligations of the Sellers in connection with the Transaction.
The Asset Purchase Agreement also contains customary provisions governing circumstances under which Buyer or Sellers may terminate the Asset Purchase Agreement. Each of the Sellers and Buyer may terminate the Asset Purchase Agreement by mutual written consent or if the closing of the Transaction does not occur on or before June 7, 2019, provided that the terminating party is not the cause of the failure of the Transaction to close by such date, and the Sellers or Buyer may each terminate the Asset Purchase Agreement if the other party is in material breach of the Asset Purchase Agreement, provided that the terminating party is not the cause of such material breach of the Asset Purchase Agreement.
The foregoing description of the Asset Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Asset Purchase Agreement, which is filed with the U.S. Securities and Exchange Commission (the “SEC”) as Exhibit 2.1 to this Current Report on Form8-K. Exhibit 2.1 is intended to provide investors and security holders with information regarding the terms of the Asset Purchase Agreement, but is not intended to provide any other financial information about the Company or its subsidiaries or affiliates. The representations, warranties, and covenants contained in the Asset Purchase Agreement were made only for purposes of such agreement and as of specific dates, are solely for the benefit of the parties to such agreement, may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk among the parties thereto instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors. Investors should not rely on the representations, warranties, or covenants or any description thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after the date of such agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
