Jan. 8 (Bloomberg) — WellPoint Inc. agreed to sell the online contact-lens site, 1-800-Contacts, to private equity firm Thomas H. Lee Partners as it focuses on its core insurance business with the start of Obamacare's expanded coverage.
Financial terms weren't disclosed. The transaction will result in a charge of 52 cents to 57 cents a share for the fourth quarter of 2013, Indianapolis-based WellPoint said yesterday in a statement. The health insurer also plans to sell Glasses.com, part of the contact-lens retail operation, to Milan-based Luxottica Group SpA.
WellPoint, the second-largest for-profit insurer in the U.S., operates Blue Cross and Blue Shield health plans in 14 states including California and New York. The company is gearing up for potentially millions of new customers from the insurance marketplaces that began Jan. 1 under the 2010 Patient Protection and Affordable Care Act, known as Obamacare. Chief Executive Officer Joseph Swedish said the sale of the contact-lens site will raise money for WellPoint's main business.
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"As we prepare for the coming changes to the health-care system, we are focused on our core growth opportunities across both our commercial and government business segments," Swedish said in the statement. "Proceeds from this transaction will support our continued capital deployment strategies."
WellPoint's charge against its earnings for the sale may be as much as $168 million, based on 295.4 million shares outstanding, according to data compiled by Bloomberg.
"The fact they're selling it 18 months after they bought it for a loss indicated it probably didn't belong under WellPoint in the first place and it's probably a good thing they're disposing of it," Les Funtleyder, an industry analyst and author of "Health-Care Investing," said in a telephone interview.
WellPoint bought 1-800 Contacts from the private equity firm Fenway Partners in June 2012 for about $900 million. The purchase wasn't popular with investors and WellPoint's former CEO, Angela Braly, left the company about three months later. Swedish was appointed CEO in February 2013.
"There would have been more accretive and synergistic ways to deploy close to $1 billion than to buy this business," said Ana Gupte, an analyst with Leerink Partners in New York.
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