WellPoint Eyes 1-800 Contacts in $900M Deal

By FOXBusiness

WellPoint (NYSE:WLP) on Monday said it will buy 1-800 Contacts, the largest U.S. direct-to-consumer contact lens seller, in the latest sign health insurers are diversifying into higher-margin businesses.

While financial details weren’t officially disclosed, a source close to the matter told Reuters that the purchase price would be around $900 million. The deal, if approved, is expected to close in the third quarter.

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1-800 Contacts, which is owned by private equity company Fenway Partners, serves about 3.3 million a day, allowing them to order eyewear over the phone or online for home delivery.

In a statement, WellPoint chief executive Angela Braly said the new assets will help the health benefits manager diversify and expand in the eyewear marketplace and enhance efforts to build customer relationships.

“This acquisition strategically aligns with our efforts to capitalize on new opportunities for growth, and further diversifies the company's revenue stream into the complementary and higher-margin eyewear business,” Braly said.

WellPoint said the deal is expected to reduce earnings by about 4 cents a share this year, due to integration costs.

It now anticipates 2012 earnings of $7.80 a share, which is a penny below average analyst estimates of $7.79 in a Thomson Reuters poll.