Telstra’s largest single retail outlet licensee, Vita Group, is one step closer to exiting the segment after finalising a deal to sell its Telstra-branded stores to the company from which they draw their namesake for $110 million.
The move comes more than half a year after Telstra revealed it would sever its 26-year relationship with Vita Group, opting to take full ownership over its self-branded retail store network.
In February, when the decision was announced, it was suggested that the current dealer agreement between Telstra and Vita Group would cease on 30 June 2025.
At the time, Telstra had 67 stores it owned and operated directly, with another 166 branded stores run by independent licensees and a further 104 stores run by Vita Group, which expressed concerns in 2017 over Telstra's prior decision to dramatically drop its remuneration rate by about 10 per cent.
Now, the two publicly listed companies have struck a deal that is clearly acceptable to both parties, with the proposed transaction involving the sale of Vita’s retail information and communication technology (ICT) business to Telstra, including all of Vita’s Telstra branded retail stores and the company’s Sprout business, for cash consideration of $110 million.
The sale amount remains subject to a net working capital and net-debt adjustment to be calculated as of 30 September 2021.
As part of the proposed transaction, Telstra will take over the employment relationship with all store team members and field leaders, the Sprout team and the majority of supporting teams and team members -- well over 1,100 people in total -- all of whom will continue to be employed by the Vita People entity, which will be owned by Telstra if the transaction is approved.
Vita Group said in a statement that its board believed the deal provided benefits to shareholders through realising value from the ICT channel and Sprout business now, rather than trading through to the conclusion of its Telstra dealer agreement (TDA) in an “uncertain economic environment and changing ICT landscape”.
If the deal proceeds as planned, Vita expects to distribute a majority part of the proceeds to shareholders via a fully-franked special dividend of approximately $65 million to $75 million.
The remaining amount, roughly $35 million, will be used to fund the further growth of Vita Group’s Artisan Aesthetic Clinics business, which is set to become the group's core business after it offloads its ICT arm.
"This is a good outcome for all stakeholders and the fact that we have been able to reach transition arrangements that provide certainty of next steps and ensures value for all parties is positive," said Vita Group CEO Maxine Horne.
"Vita has enjoyed a long-term strategic relationship with Telstra, in which over the last 26 years I believe both parties have gained significant benefit from one another.
"I am exceptionally proud of our people and the business we have built from the very first Fone Zone store in 1995 through to the significant portfolio of Telstra stores that our highly skilled Vita ICT and support team run. In addition, over this time, we have also created and developed the brand of Sprout Accessories, one of the largest accessory providers in Australia.
"All of this, in my opinion, will be of immense benefit to Telstra. With all that is happening across both the ICT and aesthetics categories, the time is right for both parties to move forward with their respective strategies," she said. "In Vita’s case, this is focusing on the growth opportunity we have in front of us, with the Artisan network."