IBJNews

WellPoint to unload 1-800-Contacts unit

Back to TopCommentsE-mailPrintBookmark and Share

WellPoint Inc. said Tuesday that it has agreed to sell its online contact-lens site, 1-800-Contacts, to Boston-based private equity firm Thomas H. Lee Partners LP in order to focus on its core health-insurance business.

Financial terms weren’t disclosed. Indianapolis-based WellPoint paid a reported $900 million to buy the company in June 2012.

The transaction will result in a charge of 52 cents to 57 cents a share for the fourth quarter of 2013, WellPoint said in a prepared statement. The insurer also plans to sell Glasses.com, part of the contact-lens retail operation, to Milan-based Luxottica Group SpA.

 “Unlike peers that are moving towards diversification and vertical integration, WellPoint’s new CEO is focusing on streamlining operations and growing in the commercial segment through the health insurance exchanges,” Sarah James, a Wedbush Securities Inc. analyst in Los Angeles, said in a report.

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.

“We see the transaction as a decisive action by new CEO Joseph Swedish to reverse one of the less-popular moves by his predecessor,” Ana Gupte, an analyst with Leerink Partners in New York, said in a report.

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 under the coverage expansions of the 2010 Patient Protection and Affordable Care Act, known as Obamacare, that began Jan. 1. CEO Joseph Swedish said the sale of the contact-lens site will raise money for WellPoint’s insurance business.

“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.”

“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,” said Les Funtleyder, an industry analyst and author of “Health-Care Investing.”

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.




 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Socialized medicine works great for white people in Scandanavia. It works well in Costa Rica for a population that is partly white and partly mestizo. I don't really see Obamacare as something aimed against whites. I think that is a Republican canard designed to elicit support from white people for republican candidates who don't care about them any more than democrats care about the non-whites they pander to with their phony maneuvers. But what is different between Costa Rica nd the Scandanavian nations on one hand and the US on the other? SIZE. Maybe the US is just too damn big. Maybe it just needs to be divided into smaller self governing pieces like when the old Holy Roman Empire was dismantled. Maybe we are always trying the same set of solutions for different kinds of people as if we were all the same. Oh-- I know-- that is liberal dogma, that we are all the same. Which is the most idiotic American notion going right back to the propaganda of 1776. All men are different and their differences are myriad and that which is different is not equal. The state which pretends men are all the same is going to force men to be the same. That is what America does here, that is what we do in our stupid overseas wars, that is how we destroy true diversity and true difference, and we are all as different groups of folks, feeling the pains of how capitalism is grinding us down into equally insignificant proletarian microconsumers with no other identity whether we like it or not. And the Marxists had this much right about the War of Independence: it was fundamentally a war of capitalist against feudal systems. America has been about big money since day one and whatever gets in the way is crushed. Health care is just another market and Obamacare, to the extent that it Rationalizes and makes more uniform a market which should actually be really different in nature and delivery from place to place-- well that will serve the interests of the biggest capitalist stakeholders in health care which is not Walmart for Gosh Sakes it is the INSURANCE INDUSTRY. CUI BONO Obamacare? The insurance industry. So republicans drop the delusion pro capitalist scales from your eyes this has almost nothing to do with race or "socialism" it has to do mostly with what the INSURANCE INDUSTRY wants to have happen in order to make their lives and profits easier.

  2. Read the article - the reason they can't justify staying is they have too many medicare/medicaid patients and the re-imbursements for transporting these patient is so low.

  3. I would not vote for Bayh if he did run. I also wouldn't vote for Pence. My guess is that Bayh does not have the stomach to oppose persons on the far left or far right. Also, outside of capitalizing on his time as U. S. Senator (and his wife's time as a board member to several companies) I don't know if he is willing to fight for anything. If people who claim to be in the middle walk away from fights with the right and left wing, what are we left with? Extremes. It's probably best for Bayh if he does not have the stomach for the fight but the result is no middle ground.

  4. JK - I meant that the results don't ring true. I also questioned the 10-year-old study because so much in the "health care system" has changed since the study was made. Moreover, it was hard to get to any overall conclusion or observation with the article. But....don't be defensive given my comments; I still think you do the best job of any journalist in the area shedding light and insight on important health care issues.

  5. Probably a good idea he doesn't run. I for one do not want someone who lives in VIRGINIA to be the governor. He gave it some thought, but he likes Virginia too much. What a name I cannot say on this site! The way these people think and operate amuses me.

ADVERTISEMENT