WellPoint said Tuesday it will sell its direct-to-consumer contact lens retailer, 1-800-Contacts, to a private equity firm so it can better focus on its core business unit and healthcare reform.
The second-largest insurer bought 1-800-Contacts for $900 million only 18 months ago when the company sought to expand further into the business-to-consumer market. But now it's under the leadership of CEO Joseph Swedish, who wants to streamline operations rather than diversify its business like many of its competitors, the Associated Press reported.
"As we prepare for the coming changes to the healthcare system, we are focused on our core growth opportunities across both our commercial and government business segments," Swedish said Tuesday in a statement. "Proceeds from this transaction will support our continued capital deployment strategies."
Industry analysts largely applauded the decision, calling it a decisive move to reverse one of former CEO Angela Braly's less popular actions. "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 said in a report, according to the Indianapolis Business Journal.
Meanwhile, industry analyst Les Funtleyder said that since WellPoint is selling the online contact lens business for a loss means it "probably didn't belong under WellPoint in the first place and it's probably a good thing they're disposing of it," the IBJ reported.
WellPoint also announced a deal to sell another similar business, glasses.com, on Tuesday. The insurer didn't disclose details of that deal.