Health insurer Humana Inc. (HUM) said Monday that it has agreed to sell the stock of Concentra Inc., its urgent care and physical therapy services unit, to MJ Acquisition Corp. for about $1.055 billion in cash.
MJ Acquisition is a joint venture between Select Medical Holdings Corp. (SEM), an operator of specialty hospitals and outpatient rehabilitation clinics in the U.S., as well as private equity firm Welsh, Carson, Anderson & Stowe XII, L.P.
Concentra, a wholly-owned subsidiary of Humana, is a provider of occupational health, urgent care and physical therapy services to employers and consumers across the U.S. According to Humana, the company treats over 14 percent of all work-related injuries nationwide.
Louisville, Kentucky-based Humana acquired Concentra in December 2010 efforts as part of its efforts to expand convenient, affordable high-quality health care for its membership base. Subsequently, the company transferred the assets of certain privately-operated Community Based Outpatient Clinics into Concentra. Humana has also divested certain Concentra non-core assets over the past four years.
Humana noted that the decision to divest Concentra demonstrates its commitment to its previously announced business portfolio review. The companies expect the transaction to close during the second quarter of 2015.
Bruce Broussard, President and CEO of Humana said, "Though Concentra's operations did not ultimately align with Humana's strategy as well as we had originally anticipated, we believe Humana and Concentra have gained valuable insights into consumer behavior over the past several years that will serve us both well moving forward. We expect Humana will continue to invest in other primary care assets, including MSOs, as we continue to expand our integrated care delivery model."
For the year ended December 31, 2014, Concentra reported revenues of about $1.0 billion. Humana expects the Concentra divestiture will be slightly dilutive to its 2015 earnings per share, excluding any one-time gain expected upon the close of the transaction.
Looking ahead, Humana reiterated its outlook for 2015 earnings of $8.50 to $9.00 per share. On average, 24 analysts polled by Thomson Reuters expect the company to report earnings of $8.87 per share for the year. Analysts' estimates typically exclude special items.
Humana expects to use the net proceeds from the sale of Concentra to advance its strategic growth priorities, to fund additional share repurchases under its existing $2 billion authorization, and for general corporate purposes.
Goldman, Sachs & Co. is acting as financial advisor to Humana, while Fried, Frank, Harris, Shriver & Jacobson LLP is acting as its legal advisor.
In a separate statement, Mechanicsburg, Pennsylvania-based Select Medical said that the company and Welsh, Carson, Anderson & Stowe or WCAS will own a 50.1 percent stake and 49.9 percent stake respectively, of MJ Acquisition.
As of December 31, 2014, Select Medical operated 113 long term acute care hospitals and 16 inpatient rehabilitation facilities in 28 states, and 1,023 outpatient rehabilitation clinics in 31 states and the District of Columbia.
Select Medical also provides medical rehabilitation services on a contracted basis to nursing homes, hospitals, assisted living and senior care centers, schools and work sites.
HUM is trading at $181.95, down $0.84 or 0.46 percent on a volume of 20,182 shares.
SEM is trading at $15.21, up $0.58 or 3.96 percent on a volume of 47,498 shares.
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