NEW YORK (Reuters) - Health insurer Humana Inc (HUM.N) said on Monday that it would sell its Concentra urgent care and physical therapy services unit for about $1 billion to private equity firm Welsh, Carson, Anderson & Stowe and Select Medical Holdings Corp (SEM.N).
Humana, which focuses on providing Medicare Advantage plans to older people, has been reviewing its assets for possible sales, and Wall Street analysts had surmised that Concentra was one of them. Humana said it would use the net proceeds to fund its existing $2 billion share buyback program and other corporate spending.
Humana purchased Concentra in 2010 for $790 million, before current Chief Executive Officer Bruce Broussard took the helm in 2013. In 2010, Concentra had sales of $800 million and was seen as a way to diversify revenue and expand strategically. Humana sold some of its assets in the interim.
Broussard said in a press release that Concentra “did not ultimately align with Humana’s strategy as well as we had originally anticipated” but that the company would continue to invest in other primary care assets. Those assets fit better with Humana’s care delivery strategies than Concentra’s focus on occupational injuries, Humana said.
Humana also said it would continue to review other business lines for possible sale.
“The Concentra asset was not as good a fit or synergistic with Humana’s core Medicare Advantage business,” Leerink Partners analyst Ana Gupte said in a research note. She noted it was the first sale under Humana Chief Financial Officer Brian Kane, formerly of Goldman Sachs’ investment bank.
Shares of Humana were down 0.5 percent at $181.90 in morning trading, while Select Medical rose 3.3 percent to $15.11.
Humana expects the sale to the joint venture run by Welsh Carson and Select Medical Holdings to close in the second quarter. Welsh Carson took Select Medical, which runs long term acute care hospitals and rehabilitation facilities, private in 2004 and then conducted an initial public offering of it in 2009. According to Thomson Reuters data, Welsh Carson no longer held a stake in the company as of Dec. 31, 2014.
Humana reiterated its 2015 earnings forecast of $8.50 to $9 per share. It said the sale would reduce profit slightly this year, excluding any one-time gain.
Humana was advised by Goldman Sachs & Co (GS.N) and Fried, Frank, Harris, Shriver & Jacobson LLP was legal advisor.
Reporting by Caroline Humer; Editing by Lisa Von Ahn