Omnia Partners (B2/B) is currently marketing a debt package consisting of a $1.625bn first lien term loan, a $155m first lien delayed draw Term Loan, and a $250m revolver due in 2030. Price talk is SOFR+450-475bps, with an OID of 97.5-98. Commitments for the Barclays-led led deal are due Thursday 20 July at 12pm EST.

The loan deal is already oversubscribed, sources told 9fin.

Pro forma first lien and total leverage will be approximately 5.5x at close based on LTM 2023 EBITDA of $287m, with $233m of that coming from Omnia and $54m from Premier.

The debt raise will initially fund $690m of Omnia’s $800m acquisition of Premier Inc's non-healthcare GPO operations and refinance existing term debt.

Omnia leverages collective buying power for clients in both the public and private sector. It streamlines procurement, reduce costs, and negotiate favorable terms from suppliers.

Omnia is owned by Leonard Green Partners and TA Associates, along with management and certain other minority holders. Leonard Green’s investment in the company in 2020 valued the company’s equity at $2.25bn.

In a lender call, the company said its current equity value is over $5bn which represents about 75% of total capitalization, translating to a 25% loan to value ratio.

Blowing up

For Omnia, more inflation means more money.

“They get a small margin on very high dollar revenue volumes. So when you’re got inflation running kind of mid-single digits or higher, that’s going to really inflate profitability,” said the portfolio manager.

In 2022, the company’s gross transaction volume was $15bn, translating to approximately $300m in revenue, generating $220m in adjusted EBITDA.

Customers are also more likely to use GPO services in the face of inflation, in order to mitigate the impact of rising costs.

Omnia’s LTM adjusted EBITDA is up 278% from 2018.

But inflation will not stay at recent levels forever, and recent data even shows the trend slowing.

To that point, S&P said it expects Omnia’s “organic revenue growth will moderate with lower inflation as members' urgency to save on procurement costs subsides.”

Moody’s also flagged the exposure to volume fluctuations combined with Omnia’s relatively small scale as a potential credit risk.

Piggybacking

Omnia Partners’ business is built on the lead agency cooperative contracting process, which is also known as “Piggybacking”. It allows local government agencies to use another public agency's active contract for purchases of products and services.

Here is how it works:

• A lead agency initiates a procurement process, such as issuing a Request for Proposal (RFP) to solicit bids from suppliers for goods or services. After evaluating the bids, the lead agency awards the contract to the selected supplier.
• Once the contract is awarded, other public agencies can "piggyback" on the lead agency's contract. This means they can utilize the same contract and access the terms negotiated by the lead agency without going through a separate procurement process.
• When other agencies piggyback on the lead agency's contract, the GPO (in this case, Omnia Partners) facilitates the utilization of the contract nationwide. In return, Omnia Partners earns an administrative fee of around 2% of the transaction value, for its services. A portion of this fee is shared with the lead agency. Around 6-8% of Omnia’s net revenue goes back to the lead agency in the form of a lead agency fee.

Omnia Partners conducts business in 50 states with political subdivisions, K-12 educational institutions, and higher education establishments.

The company is the largest customer to retailers such as Home Depot, Office Depot and Amazon. Those businesses are not set up to sell on a contract basis and lack the ability to respond to Request for Proposals (RFPs) in a GPO capacity.

Barclays, Omnia Partners, TA Associates did not respond to requests for comments and Leonard Green & Partners declined to comment.