Apologies for the new thread, but I think it is important to highlight inconsistencies in Vita's communication with shareholders from the general deal discussion.
The first reason to vote down the deal is that based on the data Vita have provided (which could be wrong), they appear to be selling at a loss (i.e. they've been 'Crazy John'd').
On page 6 of the announcement (pro forma balance sheet), you can take the difference between the two columns to determine which assets and liabilities form part of the sale group. Vita's comments above also indicate that the statements assume the special dividend has been paid - so you have to add back $70m, them subtract $110m sale price to back out that it appears the unit is going across to Telstra with $43m of cash (!) and $6m of borrowings.
When you do this exercise and exclude the leases and deferred tax asset, you get $123m of net assets being sold vs $110m sale price, so a loss of $13m. If you include the deferred tax asset (assuming they could realise it in the course of business), then the loss is $21m. The upshot here is that after all these years hoovering up franchises and improving them, they are taking a haircut on the goodwill.
The second reason to vote down the deal is that information provided to shareholders is incomplete. For example, as others have mentioned, it doesn't say anything about the fate of the Telstra Business Centres and their fate, other than that the deal includes Townsville. The release is also silent on the 'targets' for net cash/debt and working capital for the sale group. Without this information, it isn't possibly to accurately gauge what the economic consideration actually is. When Kokusai bought PaperlinX a while back, they disclosed what the target 'sale group' working capital would be - Vita should too.
The third reason is that $35m or ~1/3 of the sale price retained is too much. Fair enough maybe Maxine will go bid Wesfarmers for Clear Skincare if they take out API and get scale on the cheap, but this isn't a high probability. If an organic rollout is pursued, remember that new stores take 2-3 years to breakeven on an EBITDA basis, and the parent will still be carrying $8m+ of corporate overhead. This means losses for a while yet and probably a capital raising in the not too distant future as they will probably try to compete with larger competitors with roll-out/land-grab.
It would probably make more sense to distribute the entirety of the sale proceeds, and then Maxine could use her warchest from selling that $50m 'small parcel' in 2016 at $4.95 to take Artisan private, lest we end up with SQD Athletica Mark II.
Not sure about other holders, but I've had been exposed to enough athleisurewear to be scarred for life...
GLTAH
VTG Price at posting:
88.0¢ Sentiment: Hold Disclosure: Held
