Humana Inc. HUM has recently closed the divestiture of its wholly-owned subsidiary – Concentra Inc. – to MJ Acquisition Corporation for a cash consideration of $1.055 billion. MJ Acquisition is a joint venture between Select Medical Holdings Corporation SEM and Welsh, Carson, Anderson & Stowe XII, L.P. The deal was announced in Mar 2015 and was pending regulatory approval.
Humana had acquired Concentra in Dec 2010. Concentra’s focus on occupational injuries motivated Humana to purchase it and thereby strengthen its services. Over the years, Humana has refined its business strategy and gradually realized that the primary care platform is more capable of boosting its integrated care delivery model than occupational injuries care. Thus, the company resorted to divesting the non-core assets of Concentra. The latest transaction is the final step in this regard.
Humana expects the divestiture to lead to a one-time gain of $1.35–$1.45 per share in 2015. This is inclusive of the per share tax benefit of 35 cents recognized in the first quarter of 2015, associated with the sale that was pending then.
Earlier, Humana stated that the net proceeds from the deal will be used to finance the strategic growth initiatives of the company, for additional share repurchases under the existing $2 billion authorization and for general corporate purposes. This should help the company generate long-term growth.
Humana currently carries a Zacks Rank #4 (Sell). A couple of better-ranked stocks from the HMO space are Aetna Inc. AET and Anthem, Inc. ANTM. Both these stocks hold a Zacks Rank #2 (Buy).
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