Vita Group to exit "uncertain" core business with $110m sale to Telstra

Vita Group to exit "uncertain" core business with $110m sale to Telstra

Vita Group CEO Maxine Horne.

As a company that has effectively been an outsourced store owner-operator for Telstra (ASX: TLS) over more than two decades, the announcement of a planned termination of the partnership earlier this year was a major blow for Vita Group (ASX: VTG).

The telco giant could well have made an offer to acquire Vita Group back then given its intentions to bring store ownership in-house, but instead it slated an end to the relationship for 2025 and the retailer's shares plummeted 28 per cent.

Today the story has taken another turn, with the two parties reaching a $110 million agreement for Telstra to buy Vita Group's information and communication technology (ICT) retail business.

In other words, Telstra is buying most of Vita Group, which at the close of trade yesterday had a market capitalisation of $153.2 million.

If shareholders vote in favour of the scheme at a meeting scheduled for around 5 November, once the transaction is complete the group will pay out a special dividend of $65-75 million, keeping $35 million of the proceeds to further develop its Artisan Aesthetic Clinics business.

Artisan brought in $28.4 million in revenue in FY21 and $1.4 million of EBITDA.

In contrast, the ICT business - or Vita's Telstra stores as well as its Sprout Accessories business - generated revenue of $604.3 million and EBITDA of $71.1 million.

The board believes the deal is in the best interests of shareholders, realising value from the business now rather than trading through to the conclusion of its Telstra Dealer Agreement (TDA) on 30 June 2025 in an "uncertain economic environment and changing ICT landscape".

"This is a good outcome for all stakeholders and the fact that we have been able to reach transition arrangements that provides certainty of next steps and ensures value for all parties, is positive," says Vita Group chief executive officer 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."

Horne says the Sprout Accessories business, one of the largest accessory providers in Australia, will also be of 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 says.

"In Vita’s case, this is focusing on the growth opportunity we have in front of us, with the Artisan network."

"This agreement represents good value for our shareholders and provides certainty in a highly challenging and dynamic telecommunications market. The Vita Board unanimously supports the offer and believes that Vita is best positioned to succeed in the future, in the growing skin health and wellness industry," adds Vita Group chairman Dick Simpson.

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

New report reveals 68 per cent of businesses are vulnerable to a cybersecurity attack

Partner Content
36 per cent of employees fear their organisation is at risk of financial losse...
SAI Global
Advertisement

Related Stories

JobKeeper buoys Vita Group's bottom line despite a slump in revenue

JobKeeper buoys Vita Group's bottom line despite a slump in revenue

A massive slump in revenue has been offset by $12 million in JobK...

Major blow to Vita Group as Telstra plans to pull its store network in 2025

Major blow to Vita Group as Telstra plans to pull its store network in 2025

Communications giant Telstra (ASX: TLS) has pulled the rug from u...

Vita Group reports record revenues

Vita Group reports record revenues

The latest financial year has been kind to Vita Group, with the ...

Vita Group acquires Bradford Clinic, continues ambitious cosmetics rollout

Vita Group acquires Bradford Clinic, continues ambitious cosmetics rollout

Vita Group (ASX: VTG) has continued its expansion into the field...