Humana Inc. HUM recently entered into an agreement to divest its wholly owned subsidiary – Concentra Inc. – to MJ Acquisition Corporation for $1.055 billion. MJ Acquisition is a joint venture between Select Medical Holdings Corporation SEM and Welsh, Carson, Anderson & Stowe XII, L.P.

The divestiture is pending regulatory approval and is expected to close in the second quarter of 2015. The net proceeds from the deal will be used to finance the strategic growth initiatives of Humana, for additional share repurchases under the existing $2 billion authorization and for general corporate purposes.

Humana had acquired Concentra – Texas-based private health care company – for approximately $790 million in Dec 2010. Concentra is one of the largest providers of occupational health, urgent care and physical therapy services in the U.S.  The company treats more than 14% work-related injuries in the nation.

Humana focuses on providing superior health care to its members at affordable prices. Concentra’s focus on occupational injuries motivated Humana to acquire it and thereby strengthen its services.

Nevertheless, Humana has not limited itself to occupational injuries services. It has also invested in primary care platforms which comprise owned physician practices, clinics and medical services organizations (MSOs).

Over the years, Humana has refined its strategy and gradually realized that the primary care platform is more capable of boosting its integrated care delivery model than occupational injuries care. Thus, over the last four years the company has been selling off some of the non-core assets of Concentra. The latest transaction is a final step toward this end.

Divesting non-core businesses is a strategy that is adopted by companies quite often to focus on the core operations. Humana, being one of the leading health maintenance organizations (HMO), is no exception in this regard.

Humana expects the divestiture to be slightly dilutive to 2015 EPS. However, focus on core operations and strategic growth initiatives using the net proceeds should help the company to generate long-term growth.

Humana currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the HMO space are Aetna Inc. AET and Anthem, Inc. ANTM. Both these stocks hold a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
HUMANA INC NEW (HUM): Free Stock Analysis Report
 
AETNA INC-NEW (AET): Free Stock Analysis Report
 
SELECT MEDICAL (SEM): Free Stock Analysis Report
 
ANTHEM INC (ANTM): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research