Telstra (ASX:TLS) share price higher on Vita (ASX:VTG) deal

Telstra is buying this retailer’s ICT stores…

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The Telstra Corporation Ltd (ASX: TLS) share price and the Vita Group Limited (ASX: VTG) share price are both rising this morning.

At the time of writing, the telco giant’s shares are up slightly to $3.99. Whereas the retailer’s shares are up 6% to 98 cents.

Why is the Telstra share price rising?

The Telstra share price is rising today after Vita announced the sale of its Information and Communication Technology (ICT) retail business to the telco.

According to the release, the two parties have agreed a cash consideration of $110 million, subject to a net working capital and net-debt adjustment mechanism.

The release notes that the proposed transaction involves the sale of Vita’s Telstra branded retail stores and the Sprout business. Furthermore, Telstra will take over the employment relationship with the majority of staff involved with the stores and support teams.

The Vita Board believes the proposed transaction provides benefits to shareholders through realising value from the ICT channel and Sprout business now. This is rather than trading through to the conclusion of the Telstra Dealer Agreement in 2025 in an uncertain economic environment and changing ICT landscape.

What now for Vita?

If the transaction completes successfully, the Vita Board expects to distribute a large portion of the proceeds to shareholders.

It is proposing a fully franked special dividend of approximately $65 million to $75 million, representing $0.39 to $0.45 per share, plus franking credits of up to approximately $0.17 to $0.19 per share.

After which, Vita intends to utilise the remaining portion of proceeds, currently estimated to be approximately $35 million, to fund the further growth of its Artisan Aesthetic Clinics business.

It currently has 20 clinics across the country and is competing with Silk Laser Australia Ltd (ASX: SLA) in the growing beauty clinics market.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended SILK Laser Australia Limited. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended SILK Laser Australia Limited. 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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