viewWellpoint Systems

WellPoint to buy 1-800 Contacts for $900 million


Health insurer Wellpoint (NYSE:WLP) is reportedly planning to buy contact lens and eyewear retailer 1-800 Contacts for about $800 million, according to press reports.

The deal will close in the third quarter and will start adding to the company's per-share earnings in 2014, according to press reports. The deal likely to be financed with cash on hand.

1-800 Contacts has after-tax margins in the "double digit range," compared with around 4 percent to 5 percent across WellPoint's health-insurance business lines, press reports said.

The eyewear retailer is being sold to Wellpoint by its private equity owners Fenway Partners.

"We are very pleased with the outcome of our investment in 1-800 CONTACTS," Peter Lamm, co-founder and managing partner of Fenway Partners said in a separate statement.

"Fenway's experience with 1-800 CONTACTS is an instructive example of private equity partnering with management to create a better business - growing revenues, increasing domestic employment and payrolls, improving the customer value proposition and making significant investments in the future.

"We are delighted to have made such a positive impact on this company and that our Fenway Partners Fund investors will realize an attractive rate of return and an impressive multiple of capital."

Timothy Mayhew, managing director of Fenway Consulting Partners and chairman of 1-800 CONTACTS added: "With the opportunities presented by its new partnership with WellPoint, we believe that 1-800 CONTACTS is poised to continue to grow and further strengthen its industry-leading franchise."

Fenway Partners is a middle market private equity firm based in New York with approximately $1.6 billion under management.

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