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Vita Group Limited leaps 20% on deal with Telstra

The Vita Group Limited (ASX:VTG) share price leapt 20% to $1.50 this morning, after the company announced a conclusion of its talks with Telstra Corporation Ltd (ASX:TLS).

source: Google Finance

Readers will be aware that Telstra and Vita Group have been renegotiating their agreement, leading to a volatile share price and at times a market that has at times arguably been uninformed. Still, today’s announcement looks a positive for Vita, with several key points:

  • A minimum of 3 years notice provided by either party in advance should a termination of the agreement be desired
  • According to Vita, assuming that rolling 1-year expansions are granted annually, forward tenure will always be at least 5 years
  • Expansion of Vita’s footprint to 110 (115 from July 2019) in return for Vita agreeing to forego 7%-8% of retail remuneration

Investors were glad to have certainty in the agreement, as reflected by the jump in the share price today. Vita remains hard to value though, especially considering Telstra holds the upper hand in any remuneration changes. It may be wise to wait until its annual results come out with further information, before considering a purchase.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia owns shares of Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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